Basics of Punitive Damages in a Lawsuit
Unlike actual damages, which compensate the plaintiff in a lawsuit for an actual loss, punitive damages are an additional money award intended to punish the defendant.
In any lawsuit, the plaintiff makes a claim for damages, which is essentially a demand for money to cover the losses incurred. In some cases, a claim can also be made for punitive damages, which are intended to “punish” the negligent party, and are not related to a loss suffered by the plaintiff.
Anyone who’s been harmed by another party’s negligence is entitled to claim two types of compensation:
- economic damages
- noneconomic damages
The economic component is objective and includes monetary losses: medical expenses, lost wages, and loss of business opportunities.
On the other side, the noneconomic component is subjective and involves the evaluation of pain, suffering, inconvenience, affected companionship and emotional distress.
What are Punitive Damages?
In some cases, additional damages can be imposed. They are intended to punish the wrongdoer rather than to compensate the victim. These are the “punitive damages.”
Punitive damages are damages in excess of those required to compensate the plaintiff for the wrong done, which have to be paid if the defendant’s behavior is classified as an obvious attempt to voluntarily cause harm. Also known as "exemplary damages", punitive damages have a double objective:
- to deter the defendant from repeating or continuing the offensive behavior
- to discourage other potential parties from committing similar offenses.
When are Punitive Damages Awarded?
Punitive damages are most of the times restricted to tort cases, including a wide range of personal injury cases such as:
- premises liability
- intentional torts like assaults
- products liability (for example, if a drug company willingly lied to a plaintiff about the safety of a drug and the plaintiff suffered injuries).
Courts will not award punitive damages in contract cases, except for those situations that involve a dispute over coverage under an insurance contract. In an insurance case, the court can award punitive damages only if the plaintiff shows that the insurance company broke the good faith with malicious behavior when breaching the insurance contract.
Evidence Needed to Claim Punitive Damages
There is a basis for punitive damages in case the following evidence is available:
- the manufacturer has failed to remedy a defective design with an available safer alternative
- failure to adequately test a product
- relevant expert witness testimony
- pre-injury details concerning potential harm or death resulting from a particular course of action or inaction
- testimony of suspect's former or current employees related to company’s actions and inactions
- evidence of injuries caused to other parties, by the same conduct
- false representation of safety by a suspect may show a conscious disregard for safety
- evidence of a manufacturer's efforts to continue to market its product, despite the knowledge of the its potential to harm consumers
- evidence of a defendant's pecuniary reasons in failing to alter the course of conduct although it may result in a serious risk of harm
- the failure of a manufacturer to warn the consumers of a known hazard
- if a government entity has already made an investigation of the defendant's products and the defect in question
- evidence that a manufacturer has been made aware of a design defect, but has chosen instead to apply corrective measures, avoiding to diminish profits
- a manufacturer's actions, or lack thereof in response to numerous complaints about its products
Limits of Punitive Damages
Although the Supreme Court has not offered a specific formula for the courts’ to follow when calculating punitive damages, they stated that punitive damages are considered unconstitutional if they are disproportionate and unreasonable. However, The Court has made it somewhat clear that in practice, very few cases will justify awarding a ratio higher than a one digit between compensatory damages and punitive damages. In other words, if the plaintiff’s actual damages are $20,000, a supplementary award of $200,000 in punitive damages would generally be accepted as unreasonable and disproportionate, unless the case was unacceptably flagrant.