Key takeaways

1. In moral damages claims derived from liability cases (In Mexico, "casos de responsabilidad civil subjetiva"), courts must assess the degree of liability (i.e., the level of care taken). However, the approach differs from strict liability cases (In Mexico, "casos de responsabilidad civil objetiva"), where the law holds a defendant responsible regardless of their intent or care taken at the time of the damage. If judges were to evaluate the degree of liability in strict liability matters, they may overcompensate the victim, as a certain level of liability always exists.
2. In moral damages claims derived from strict liability cases, the courts must assess the degree of liability only in exceptional circumstances:
   1. When the victim played a role in the event, or if there is cause of exclusion.
   2. When the courts aim to prevent future harmful actions by the defendant or others, confirming the existence of punitive damages in Mexico.
3. The Supreme Court's guidelines for calculating compensation for moral damages include integral compensation, legal equality, and avoiding overcompensation. The courts should reduce excessive compensation whenever warranted by the particular case's circumstances.
4. Industries must implement protocols to minimize damages caused to employees and external providers by their commercial operations, especially for industries that use equipment that poses a risk to the safety of its employees and suppliers (i.e., mining, electric power generation, construction and manufacturing industries). Courts shall consider these actions to reduce the compensation for moral damages, including punitive ones.

In depth

In August 2023, the Supreme Court of Mexico issued three binding precedents that outline the guidelines for quantifying moral damages in liability cases. Moral damages include any loss of non-material property, such as honor, reputation, feelings, emotions or peace of mind. These guidelines are crucial for all industries, as they specify how courts should calculate compensation for moral damages if an event causes non-material harm resulting from the commercial operation. Businesses that use hazardous equipment that poses a risk to the safety of their employees and suppliers are more susceptible to this type of liability and must address these issues (i.e., mining, electric power generation, construction and manufacturing industries).

The Supreme Court addressed two key issues in these precedents: the degree of responsibility in strict liability cases and the guidelines the courts must consider when calculating compensation for moral damages. The conclusions of the Supreme Court were the following:

Degree of responsibility in strict liability cases

In two precedents, the Supreme Court analyzed the role of responsibility in strict liability cases. The Mexican Supreme Court found that degree of responsibility can be considered in two exceptional cases:

• When the victim played a role in the event, or if there is cause of exclusion. According to the Supreme Court, there might be cases where the victim's negligent conduct caused the damage, excluding certain liability. This should also apply when a third party's conduct causes the damage.
• When the courts aim to prevent future harmful actions by the defendants or third parties. In Mexico, this is known as "daños punitivos" and is only applicable in moral damages claims. They cannot be claimed independently of the moral damage. The Mexican Supreme Court resolved this issue recently in December 2022.

Finally, the Supreme Court concluded that in strict liability cases, responsibility considerations are exceptional to prevent overcompensation. The cause of the damage always carries some degree of responsibility, which could lead to an unjust increase in compensation.

The Supreme Court's rulings confirm that punitive damages are applicable in Mexico, even in cases of strict liability. Moreover, they establish that the levels of responsibility are crucial factors to be considered by the court since they can either raise or lower the compensation for this concept.

Guidelines for compensation of moral and punitive damages

The Mexican Supreme Court's last precedent summarizes previously established guidelines for quantifying moral damage:

• Previously established legal limits are not accepted.
• Compensation must be integral, equitable and fair.
• Compensation cannot be limited to the material damage.
• The damages must not be confused with its quantification.
• The quantification elements of the law are indicative factors.
• The compensation is different for cases of strict liability.
• Overcompensating the victim should be avoided.
• There must be cases to reduce compensation. For example, when the compensation is excessive for a natural person. This is not applicable to legal persons.

Based on the above guidelines, industries operating in Mexico must implement safety and emergency policies, especially those working with dangerous equipment. Mexican courts shall consider these guidelines and protocols to reduce the compensation awarded for moral damages. The level of care and the actions taken to minimize the damage caused will also be considered. Conversely, in case of negligence, the courts will increase the compensation and may impose punitive damages to discourage similar behavior in the future. Therefore, taking steps to minimize damage can have a significant impact in court.