DEFINITION of 'Punitive Damages'

Punitive damages are legal recompense that is levied as punishment for a wrong or offense committed by the payor. Punitive damages are awarded by a court of law in a lawsuit. They are often required in order to make up for a perceived shortfall in compensatory damages and are merely intended to indemnify the plaintiff.

BREAKING DOWN 'Punitive Damages'

Punitive damages can result from a personal injury claim to punish the defendant for his actions and deter him from committing similar acts in the future. Punitive damages, also called exemplary damages, may be added to compensatory damages, which cover the victim’s medical bills, hospital expenses, property damage and other fees. Punitive damages are given with other damages, never alone, and increase a plaintiff’s award. A punitive damages claim is submitted to the court and rigorously analyzed to determine whether the defendant acted maliciously or purposefully, not just negligently, toward the plaintiff. In the small percentage of cases where punitive damages are awarded, they are relatively proportionate to actual damages.

How Punitive Damages Are Calculated

The Supreme Court and the states provide guidelines for calculating punitive damages. Although there is no maximum amount, punitive damages typically do not exceed four times the amount of compensatory damages. For example, if a plaintiff recovers $100,000 in compensatory damages and is awarded punitive damages, he most likely will receive up to $400,000 in punitive damages.

Other Factors for Determining Punitive Damages

If a defendant’s actions are especially reprehensible, the harm suffered by the plaintiff is greater than the punitive damages requested or amounts awarded in similar cases are greater, higher punitive damages may be awarded. If non-economic harm is difficult to calculate, injuries are hard to detect and will need continuous care or the defendant’s conduct is extraordinarily offensive, greater punitive damages may be given. Regardless of the award, the defendant is always given fair notice for the amount of punitive damages and the conduct justifying the award.

Example of Punitive Damages

A weight loss company advertises its dietary supplements as all-natural and safe. A customer takes the supplements and becomes violently ill. The customer’s doctor determines the supplements reacted with the customer’s prescription medication to cause the illness. The customer files a civil lawsuit against the weight loss company to cover her medical expenses and lost wages, claiming the company should have known the supplements would react with prescription medication and should warn customers. The court decides in the customer’s favor and awards both compensatory and punitive damages.

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