The Supreme Court said Monday it will decide whether skyrocketing punitive-damage awards in personal-injury and other cases can go so high they become unconstitutional. In a case of enormous importance to American business and consumers, the court agreed to hear arguments in an Alabama insurance-fraud case that yielded a jury award of over $1 million. The court must decide whether punitive damages aimed at punishing wrongdoers and deterring similar misconduct may be so large in some cases that they are fundamentally unfair. A ruling is expected sometime in 1991. In other action, the court: _Refused to expose car manufacturers to product-liability lawsuits for not installing air bags. Suits against General Motors, Honda and Nissan Motor Corp. were thrown out by lower courts and the justices declined to review them. _Left intact a ruling that airlines say could impede mergers. The justices, in a case stemming from Delta Air Lines' acquisition of Western Airlines in 1986, refused to shield Delta from binding arbitration in a dispute with the union that had represented Western's flight attendants. _Turned down an appeal by a Massachusetts church that said its religious freedom will be violated if state approval is required for the curriculum of a school it runs. The court last year ruled that huge awards in civil lawsuits, often millions of dollars, do not violate the Constitution's ban on excessive fines. But the justices left open the possibility that such awards may be so disproportionate to the actual harm suffered that they violate due-process rights. The Constitution says states may not deprive anyone of property without due process of law. Those seeking to limit awards say due process prohibits unlimited discretion by judges and juries. Business leaders for years have clashed with lawyers and consumer groups over the legitimacy of huge judgments in civil cases. Those who oppose the big-money awards say they squelch American competitiveness and development of new products, particularly new forms of medical treatment, by discouraging risk-taking. They say juries capriciously penalize the wealthy to help those who have suffered serious injuries, particularly if the wrongdoer is a giant corporation. On the other side, consumer activists and trial lawyers say punitive damages are a powerful deterrent to corporate greed that can threaten public safety and well-being. They say smaller compensatory awards may be viewed by larger corporations as an acceptable cost of doing business. Recent studies show the size of punitive damages has climbed dramatically in recent years. Some state legislatures, reacting to soaring insurance rates, have put caps on how much money can be recovered in personal-injury cases. Those laws are not at issue directly in the case acted on Monday. The justices will hear an appeal by Pacific Mutual Life Insurance Co., found by a jury to have been responsible for fraud by one of its agents, Lemmie Ruffin. The company denied it had sanctioned Ruffin's conduct. Lower court records said employees of Roosevelt City, Ala., paid health insurance premiums to Ruffin, which he pocketed. Cleopatra Haslip, a city worker who had been paying premiums, learned her insurance had lapsed after she incurred $2,500 in hospital and medical bills in 1982. The hospital demanded $600 before agreeing to discharge her, and her doctor eventually turned her case over to a collection agency. Her credit also suffered from her inability to pay the bills. Mrs. Haslip and other members of the insurance plan sued Pacific Mutual and Ruffin. A jury in 1987 awarded her $1,040,000. Three other Roosevelt City employees were awarded a total of $38,000. It is not clear from records filed with the Supreme Court how much of the money was intended to compensate the workers for actual losses and how much was designed to punish the insurance company. The Alabama Supreme Court upheld the awards last year, saying, ``Jury verdicts are presumed correct, and that presumption is strengthened when the presiding judge refuses to grant a new trial.'' Pacific Mutual said its constitutional rights were violated because the jury was allowed to award damages ``as a matter of moral discretion without adequate standards as to the amount necessary to punish and deter.'' The company also contended it is the victim of unfair discrimination because Alabama law imposes a cap on punitive damages in some cases.
