The legal term punitive damages refers to a monetary award ordered by the court to be paid by a defendant to the plaintiff in a civil lawsuit. While it is common for a plaintiff to be awarded money to pay for a wrong committed by the defendant, such as money to pay medical bills, or for property damage, punitive damages are awarded only for the purpose of punishing the defendant for his conduct. A punitive damages award is paid to the plaintiff by the defendant. To explore this concept, consider the punitive damages definition.
Definition of Punitive Damages
- Damages awarded to a plaintiff, in addition to compensatory damages, in order to punish the defendant for a willful or reckless act.
What are Punitive Damages
Punitive damages, also known as “exemplary damages,” are a monetary amount awarded to a plaintiff in a civil lawsuit for the purpose of punishing the defendant, or to deter him from engaging in the same conduct in the future. Punitive damages are award in addition to any compensatory or other damages, increasing the plaintiff’s total award. There are rules governing the award of punitive damages. They are most commonly awarded in cases in which the compensatory damages seem to be an inadequate remedy, and because of the defendant’s egregious conduct.
Example of Punitive Damages
A company that manufactures and distributes dietary supplements assures customers that their weight loss formula is a safe and effective way to lose weight, advertising the supplement as an “all natural,” and completely safe supplement. Amanda, who believed the company’s claims, took the supplement for 30 days before becoming violently ill. Her doctors determined that at least one of the substances contained in the supplement reacts with a number of prescription medications, one of which Amanda was taking, and thus caused her serious illness.
Amanda’s medical bills amounted to nearly $5,000, prompting her to file a civil lawsuit against the company to recoup her medical expenses, as well as lost wages for the two weeks she was off work. Amanda claims in her lawsuit that the company knew, or should have known, that the contents of the weight loss formula were likely to react badly with certain prescription medications, and that they should warn consumers.
At trial, the company insists it has not broken any laws or regulations, and makes it clear it has no plans to pull the product off shelves, or to alter its advertising campaign. In the end, the judge rules in Amanda’s favor, awarding her compensatory damages (to compensate her for medical expenses and loss of income), in the amount of $7,000.
The court also admonishes the company, making it clear that the court’s opinion is that the company has negligently and recklessly risked people’s health. The judge then awards Amanda punitive damages in the amount of $100,000, with the hope that a large hit to its bank account will convince the supplement company to change its ways, to be more serious about the safety of the supplements it manufactures.
Difference Between Punitive Damages and Compensatory Damages
Both punitive and compensatory damages are monetary amounts that may be awarded to a plaintiff in a civil lawsuit. Compensatory damages are the most commonly awarded type of damages, as they are intended to compensate the plaintiff for loss of money or property due to the defendant’s actions. Compensatory damages, also known as “actual damages,” pay for such losses as damage to the plaintiff’s car in an accident, injuries sustained in a slip-and-fall accident, or money lost due to the defendant’s breach of contract.
Punitive damages are awarded as punishment for the misconduct of the defendant. Punitive damages are awarded to the plaintiff, but the main goal is deterrence of the behavior that brought about the lawsuit. A judge will award punitive damages if he wishes to make an example of the defendant, or if he believes that compensatory damages are not enough to punish the defendant.
Tim is answering a text message while driving, when he suddenly slams into the back of a car that had stopped to allow children to cross the street. Nelly, who was driving the other car, suffered whiplash, and a strain to her shoulder. The rear end of Nelly’s small car was crushed severely by Tim’s pickup truck. Tim, who tries to tell police that Nelly stopped “out of nowhere,” and that it was her fault because her brake light didn’t work, refuses to pay for her expenses.
Nelly files a civil lawsuit requesting $4,521 for repairs to her car, and $3,500 for medical expenses. The judge quickly determines the accident to be Tim’s fault, as he should have been more watchful of the cars in front of him, and awards Nelly compensatory damages for the full amount requested.
In addition, however, the judge points out that texting, or using a cell phone in any way, while driving, is an illegal act, and that Tim recklessly endangered the lives of others by doing so. The judge orders Tim to pay punitive damages in the amount of $10,000. This brings Nelly’s total recovery to a hefty $18,021.
Factors Used to Determine Punitive Damages
The court takes several things into consideration when deciding whether or not to award punitive damages. Commonly considered factors include:
- How egregious or reprehensible the defendant’s actions were
- Whether similar cases ended with punitive damages being awarded
- The different between the plaintiff’s injuries or losses and the amount of punitive damages he is requesting
Substantially higher awards of punitive damages may be seen in cases in which:
- The harm done is difficult to put a value on
- There are injuries that are difficult to detect, or which are likely to need continued care in the future
- The defendant’s conduct was extraordinarily offensive
Limits on Punitive Damages
In most jurisdictions, the laws place limits on the amount of punitive damages that can be awarded. While the exact limits vary from state to state, each court can only award an amount that is considered relatively proportionate and reasonable. In general, the amount of punitive damages cannot exceed four times the amount of compensatory damages that are awarded to a plaintiff. For instance, if a plaintiff is awarded $50,000 in compensatory damages, the court would not typically award him more than $200,000 in punitive damages, unless special circumstances existed.
Other Types of Damages
There are many types of damages awarded in order to compensate people in either civil or criminal court cases. While compensatory and punitive damages are the most common types awarded, these types of broken down further into special categories.
Special damages are a form of compensatory damages, intended to compensate a person for monetary expenses incurred because of an injury caused by the defendant’s actions. Special damages are unique to each case, as injuries and treatment expenses vary widely by circumstance. There are no set standards or limits set on special damages.
Wrongful Death Damages
Wrongful death damages are sometimes awarded to help surviving family members when a person dies as a result of someone else’s negligence. These damages cover funeral and burial expenses, pre-death care, loss of financial contributions, and loss of consortium, and other losses. Wrongful death damages can be awarded even if the defendant has not been charged with the criminal offense of wrongful death or murder.
Collecting Punitive Damages
Once damages have been awarded in a lawsuit, actually collecting that money is sometimes difficult. If the defendant fails to pay the amount ordered by the court, whether because he does not have the financial resources to do so, or he simply refuses, there are steps that can be taken to collect. The most common methods for collecting on a judgment include obtaining an order for wage and/or tax return garnishment, and placing liens on property owned by the defendant.
Punitive Damages in Action
In every civil lawsuit filed in the U.S., the plaintiff is asking the court to award some type of damages. Compensatory damages make the plaintiff whole financially, but in many cases, the defendant’s behavior or actions are seen to be so deplorable or scandalous, as to prompt the court to award punitive damages as well.
Hyundai Ordered to Pay Two Families $240 Million in Punitive Damages
In 2011, two teenagers died in a car accident, which their families claim was the fault of Hyundai Motors, the maker of the car the teens were driving. The families filed a civil lawsuit against Hyundai, and submitted evidence that the steering knuckle broke, causing the fatal crash. In addition, Hyundai had more than a decade in which notices were received about defects in that model vehicle’s steering knuckles, but chose not to take action.
At the conclusion of the trial, the jury ordered the company to pay, in addition to compensatory damages, $240 million dollars in punitive damages. Hyundai appealed the extraordinary amount of punitive damages, based on the state’s laws limiting such awards. The appellate court judge ruled that the state’s laws limiting punitive damages is unconstitutional, but she did agree that the “degree of the defendant’s reprehensibility” warranted the use of the highest single-digit multiplier in determining the amount of punitive damages to be awarded.
This means that, while most awards of punitive damages amount to three or four times the amount of compensatory damages, the judge deemed this case to merit an award of nine (the highest single digit) times the amount of compensatory damages. The judge multiplied the compensatory damages amount of $8.1 million by 9, to arrive at a punitive damages award of $73 million.
Related Legal Terms and Issues
- Actual Damages – Money awarded to compensate someone for actual monetary or property losses. Also referred to as “compensatory damages,” the amount of money awarded is based on the proven loss, injury, or harm proven by the plaintiff.
- Civil Lawsuit – A lawsuit brought about in court when one person claims to have suffered a loss due to the actions of another person.
- Damages – A monetary award in compensation for a financial loss, loss of or damage to personal or real property, or an injury.
- Defendant – A party against whom a lawsuit has been filed in civil court, or who has been accused of, or charged with, a crime or offense.
- Jury – A group of people sworn to render a verdict in a trial, based on evidence presented.
- Monetary Damages – Money ordered by the court to be paid to an individual or entity as compensation for injury or loss caused by the wrongful conduct of another party.
- Plaintiff – A person who brings a legal action against another person or entity, such as in a civil lawsuit, or criminal proceedings.
- Trial – A formal presentation of evidence before a judge and jury for the purpose of determining guilt or innocence in a criminal case, or to make a determination in a civil matter.