California’s New Damages Legislation Will Harm Businesses

Oct 14, 2021 | Litigation Management

California’s Governor Gavin Newsom has signed into law S.B. 447, which was sponsored by the Consumer Attorneys of California (an organization of 3,000 plaintiffs lawyers), and overturns the longstanding legislation to allow for pain and suffering damages to be compensated in a survival action. The amended California Code of Civil Procedure Section 337.34 now provides as follows:

“(a) In an action or proceeding by a decedent’s personal representative or successor in interest on the decedent’s cause of action, the damages recoverable are limited to the loss or damage that the decedent sustained or incurred before death, including any penalties or punitive or exemplary damages that the decedent would have been entitled to recover had the decedent lived, and do not include damages for pain, suffering, or disfigurement.

(b) Notwithstanding subdivision (a), in an action or proceeding by a decedent’s personal representative or successor in interest on the decedent’s cause of action, the damages recoverable may include damages for pain, suffering, or disfigurement if the action or proceeding was granted a preference pursuant to Section 36 before January 1, 2022, or was filed on or after January 1, 2022, and before January 1, 2026.”

In essence, for those cases filed prior to January 1, 2022 wherein preference was granted under California Code of Civil Procedure Section 36 and a plaintiff passes away prior to the case reaching trial, the right to recover damages for pain, suffering, or disfigurement are preserved. For any wrongful death action filed between January 1, 2022 and January 1, 2026, pain and suffering damages for the decedent are now recoverable. It is unclear whether Code of Civil Procedure Section 337.34 will become a new permanent law after January 1, 2026 as it currently has a four year sunset provision.

However, we anticipate that over the next four years there will be significantly larger verdicts in California, a state already known for runaway verdicts. Unfortunately, the California tax payers and citizens will bear the brunt of these verdicts. First, when insurance companies are required to payout larger and larger verdicts they pass those costs on to the insureds in the form of increased premiums. Second, California is already viewed as being unfriendly towards businesses. Larger verdicts will only be viewed as further anti-corporate sentiment. The impacts of this will likely lead to a loss of California businesses which will result in a loss of tax revenue. This will ultimately have to be made up for with other taxes. California has already seen an exodus of both citizens and businesses to states with a far lower tax burden and one would only expect this trend to continue as result of this change.

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