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According to Investopedia,Punitive damages are legal remuneration that a defendant who has been found guilty of committing a wrong or offense must pay in addition to compensatory damages. When compensatory damages are considered insufficient, they are awarded by a court of law.
The plaintiff receives compensation for actual damages, often known as compensatory damages, such as property damage, medical bills, and lost wages in most circumstances,
Punishing a defendant goes beyond repaying the injured party and penalizes defendants who have engaged in highly negligent or malicious conduct. When they are meant to set an example and dissuade others from performing similar crimes, they are exemplary of damages.
Suppose the defendant’s acts were extremely irresponsible or the harm suffered by the defendant was impossible to quantify financially. In that case, the court can award punitive damages to punish the offender and deter similar behavior. Punitive damages are usually given when compensatory damages don’t seem to be enough to make up for what the defendant did.
What Are Punitive Damages? How Do They Work?
It is intended that making the culprit pay a sum well above compensatory damages will deter the defendant and others from repeating the same wrongdoings in the future. Punitive damages may be added to compensatory damages in a personal injury case to cover the victim’s medical bills, hospital expenditures, property damage, and other costs.
Limits on Punitive Damages
In most breach of contract instances, punitive damages are not available and are limited by state statutes and federal judicial precedents. Every lawsuit, especially ones involving personal injury, has its own complicated set of facts, which makes it hard for anyone but an experienced lawyer to figure out what the limits are in a given case.
Constitutional constraints on Punitive Damages
The United States Supreme Court declared in State Farm Mutual Automobile Insurance Company v. Campbell (2003) 538 U.S. 408, 425 (State Farm) that substantial punitive damage awards violate the United States Constitution’s due process provision. The Supreme Court evaluated the punitive damages based on three criteria:
- The gravity of the defendant’s actions
- The gap between the plaintiff’s actual or probable injury and the punitive damages award
- The distinction between punitive damages and civil penalties that have been imposed in similar circumstances
The Reprehensibility Factors of the United States Supreme Court
The criteria for determining whether a defendant’s actions are heinous enough to warrant punitive penalties include:
- Was there any physical or financial harm?
- Is there a pattern of indifference or reckless disdain for others’ health or safety?
- Was the plaintiff in a financial bind?
- Is the behavior part of a trend or a one-time occurrence?
- Was the injury committed by malicious intent, deception, or trickery, or was it simply an accident?
Punitive Damages Caps in the States
Punitive damages are handled differently in each state, as they are in many other areas. Some states allow for an unlimited amount of punitive damages, while others have tight limits on the magnitude of the award and the level of proof required to justify one. For example, punishing a defendant, judgments in Connecticut are limited by state law to the actual cost of litigation, including attorney’s fees, although they are unrestricted in other states.
Punitive Damages in the Real World:
In 1992, one of the most well-known punitive damage lawsuits in the United States took place. Stella Liebeck of New Mexico was severely burned after a cup of coffee she bought from a McDonald’s Corp. drive-through spilled over her lap after her grandson stopped the car she was in so she could add sugar and cream.
After spending eight days in the hospital, Liebeck reportedly begged McDonald’s for $20,000 to cover her medical fees. When the fast-food establishment declined, Liebeck filed a lawsuit.
During the discovery phase of the case, it was revealed that McDonald’s had been hit with over 700 similar claims in the ten years leading up to Liebeck’s event. Those statements suggested that the corporation was aware of the risks associated with its coffee’s high temperatures. It was also discovered that competitor companies and individuals at home provided coffee at a lower temperature.
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Liebeck was awarded $200,000 in compensation damages (later lowered to $160,000 after the jury concluded she was responsible for 20% of the leak) and $2.7 million in punitive damages (later reduced to $480,000 to cap Liebeck’s judgment at three times the compensatory damages). McDonald’s was obliged to pay, and in response, the temperature of its coffees was lowered.
Even while it may appear like a punishment a defendant is awarded in every litigation that hits the news, courts only award them in around 5% of verdicts. Given the multiple states and federal rules governing damages, it might be challenging to comprehend when and why punitive damages apply in the real world. We’ve taken a few instances from the lawsuits we cover to help clarify this.