Business, Legal & Accounting Glossary
Punitive damages are given as compensation in a civil case to discourage the future actions of the defendant. Punitive damages are in addition to compensatory damages such as medical expense compensation or wage loss compensation which is used to make the plaintiff “whole.”
Punitive damages are not allowed for all personal injury claims but are generally awarded when the defendant’s actions are found to be grossly negligent. Although the court may have some discretion to limit punitive damages, this ability is generally exercised with great caution. As a general rule, an award of punitive damages will not be set aside or changed unless the court determines the decision was based on prejudice or passion and the verdict is determined to be excessive.
Punitive damages are also known as exemplary and are awarded to the plaintiff over and above the compensatory damages that have been awarded. Where compensatory damages cover the actual monetary losses of the plaintiff, punitive damages are meant to punish the defendant’s behaviour and discourage any future similar behaviour.
Punitive damages are meant to punish and discourage malicious, wanton or willful conduct or conduct that is in reckless disregard of the plaintiff’s rights.
This misconduct is thought to be so outrageous and egregious that it would be intolerable to any reasonable and prudent person.
The plaintiff has the burden of proving that punitive damages should be awarded and in what amount. Punitive damages also serve to compensate for the intangibles not covered by compensatory damages or to cover the cost of the personal injury lawyer, who will be paid 30 – 40 per cent of the settlement. So, punitive damages can serve as an inexact way to assure the plaintiff gets paid what is truly owed.
Compensatory damages are the actual concrete monetary loss suffered by someone who was injured by negligence or willfulness of another or the damage to the person’s property. Punitive damages, however, have no standard amount from which a basis can be made. Some states limit the amount of punitive damages that can be awarded in certain personal injury cases, so its important to know the laws in your particular state.
Tort reform has been proposed in many states in order to put limits on punitive damages that may be awarded. It is thought by many in the business community and individuals as well that some of the high-profile punitive damages that have been awarded are more on part with “winning the lottery” than winning a personal injury case. This type of lawsuit abuse they say cannot be tolerated. As a special type of tort reform that has been proposed is split-recovery punitive damages.
In 2002 the state of Ohio issued a ruling on split-recovery punitive damages, in which the state gets part of the damage award that has been ordered by the courts for the plaintiff. The reasoning is that if the intent of punitive damages is to punish the perpetrator and discourage others from future misconduct for the good of society, why should one plaintiff be rewarded with a windfall of millions of dollars? Ohio’s Supreme Court reasoned that the punitive damages should be split between the plaintiff and society.
Other split-recovery punitive damage states include Alaska, California, Georgia, Illinois, Indiana, Iowa, Missouri, Oregon, and Utah. These states differ, though, on which types of cases the split-recovery punitive damages laws apply. One of the problems with the split-recovery punitive damages is that many times personal injury cases are settled outside of court and sometimes they are settled in light of the state getting the lion’s portion of the settlement.
In the O. J. Simpson Case, Mr Simpson was found not guilty in the criminal courts, but in the civil courts, he was found guilty by a preponderance of the evidence in the wrongful death of Nicole Brown Simpson and Ronald L. Goldman. The Goldmans and Browns were awarded $8.5 million in compensatory damages and $25 million in punitive damages.
In the Betty Bullock v. Philip Morris tobacco case, a Los Angeles jury awarded Bullock $850,000 in compensatory damages. The same jury awarded Bullock, who was dying of cancer at the time, to $28 billion, the largest award ever to an individual.
In Hayes v. Courtney, the jury showed outrage toward Robert R. Courtney, a pharmacist who diluted cancer patients’ medication in order to boost his own profits. The Kansas City juror awarded the plaintiff $225 million in compensatory damages and $2 billion in punitive damages. The jurors said they knew that Courtney would never pay the $2 billion in damages but they wished to make a statement about his outrageous and egregious behaviour.
Sometimes jurors do just that – they award punitive damages to make a statement. Many times punitive damages such as these are reduced upon appeal or else they are settled before or during the appeal process. Other times punitive damages take hold and stick through the appeal process and this will differ from state to state and district to district.
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This glossary post was last updated: 31st March, 2020