Since punitive damages are meant to be used as punishment and to create deterrence among manufacturers, this is one matter that should be decided by every state based on its common-law practices. The reasoning behind this is simple: punitive damages under products liability are part of public choices that differs among states. These differences depend on the values and principles of the particular area to determine the importance of the damage generated by improper conduct and the value placed on the injustice.
Consider California, for example. In order to award punitive damages, a jury needs to value three alternatives: malice, oppression or fraud. Without one of these elements present in the case, no punitive damages can be awarded.
What can we understand about the concept of malice? The subject that acts with malice has the intent to cause the injury, and in this action, he or she acts willful and knowingly disregards the rights and safety of another. Moreover, the actor understands the risks, yet knowingly disregards them. This is not a case of negligence, in which the actor did not intend to harm another. In malice, the wrongful party knew that there was a negative possibility and did not take appropriate measures to prevent that risk, avoiding the foreseeable consequences of one’s action. For example, a pharmaceutical company is aware that the use of a certain flu medication it is likely to cause pregnant women to miscarry, and the company fails to warn the public of this possibility.
What is oppression? The principle behind this concept is even more serious since a person or company acts oppressively when the conduct is proved to be highly inappropriate and considered wrong by reasonable people. Here, one acts in a cruel and unjust manner, causing hardship and knowingly disregarding the rights of others. For example, a pharmaceutical company does not test a new drug in order to review the secondary side effects that it may have on pregnant women, even though a layperson believes that this should be a normal procedure for drug testing.
What constitutes fraud for this analysis? The concept of fraud is concealing the fact behind a product and intentionally trying to cause harm to others. It is very rare that one can apply this standard to products liability because one needs to prove that the manufacturer wanted to harm its consumers or intentionally lied in order to disguise the truth about the dangers of continuously using a product, like medicine.
Under a malice case, the manufacturer is aware of the harmful consequences of the use of the product and actively tried to conceal this fact.
For example, a pharmaceutical company developed a medicine that is likely to cause women to miscarry. However, the company could spend 50 cents more, changing one of the main ingredients of the medication and negating the serious side effect. The side effect can be avoided, but the manufacturer decides not to assume the extra costs of this modification.
In the case of Grimshaw v. Ford, the company was forced to pay punitive damages based on the fact that it did not modify the design of its Pinto model, putting the gas tank behind the axle in order to save the costs of a shield. According to the court, the cost of this shield was negligible compared with the potential harms that the absence of it could cause.