The Georgia Supreme Court on Thursday unanimously upheld a $40 million award to the family of a 4-year-old boy killed in 2012 when the 1999 Jeep Grand Cherokee in which he was riding was rear-ended and burst into flames.
A lower court in 2015 reduced a jury verdict from nearly $150 million to $40 million.
Fiat Chrysler spokesman Michael Palese said the company was "disappointed in this decision. We are considering our legal options."
The Jeep's fuel tank was placed near the back of the vehicle, which plaintiffs said made it vulnerable to rear-end collisions.
The Supreme Court ruling said "evidence showed that Chrysler had long known that mounting a gas tank behind the rear axle was dangerous. Evidence also showed that Chrysler's placement of the gas tank behind the rear axle was contrary to industry trends, which favored placing tanks in front of the rear axle."
Fiat Chrysler lawyers said during the trial that the fire did not cause Walden's death and blamed the driver of the pickup truck that hit the vehicle. The company said Thursday it "continues to extend sympathies to the family of Remi Walden for their loss."
On appeal, the company contended it was prejudicial to raise Fiat Chrysler Chief Executive Sergio Marchionne's compensation, which totaled more than $68 million, according to a company executive who testified at trial.
The automaker had denied there was a safety issue and has said the vehicles were no more dangerous than comparable SUVs built at the time. The National Highway Traffic Safety Administration (NHTSA) linked more than 50 deaths to the Jeep fuel-tank issue.
Under government pressure, Fiat Chrysler recalled 1.56 million 2002-07 Jeep Liberty and 1993-2004 Jeep Grand Cherokee SUVs in June 2013 to address fire risks and agreed to install trailer hitches to protect the gas tanks.
The recall and a "customer satisfaction campaign" that covered the Jeep in the fatal Georgia crash occurred after Marchionne held private talks with senior U.S. Transportation Department officials in 2013.
The Georgia Supreme Court opinion said the award was proper in part because Marchionne was "alleged to have specifically interjected himself in a federal safety investigation to the detriment" of the Walden family.
In 2015, NHTSA announced Fiat Chrysler would pay a then-record $105 million civil penalty over lapses in safety recalls involving millions of vehicles, including older Jeep SUVs for fire risks.
Reporting by David Shepardson