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Punitive Damages - What Exactly Are They?



In most auto accident claims or lawsuits a victim is seeking to be compensated for their actual pain and suffering and financial damages. Punitive damages are another layer of financial compensation that go above and beyond the actual damages and penalize the other party.

If you find yourself in a situation where punitive damages are in play then it's important to have an understanding of how exactly they work.

In this article, we'll cover...

What is “Punitive Damages”?
When are They Awarded?
What Evidence Do You Need to Receive Compensation?
3 Examples of Punitive Damages

What is “Punitive Damages”?

The word “punitive” is derived from a Latin word which means “punished”. The idea being, that punitive damages are meant to punish and discourage future bad behavior.

In terms of an official definition, Cornell Law School Legal Institute offers us this [1]:

“Punitive damages are awarded in addition to actual damages in certain circumstances. Punitive damages are considered punishment and are awarded when the defendant's behavior is found to be especially harmful.”

The first thing to know about punitive damages is that they are relatively rare when it comes to personal injury or auto accident cases. Theses additional costs are tacked onto the other (negligent) party and can be thought of as “on top of” costs.

Punitive damages are somewhat controversial.

  • Proponents believe that they serve important social functions such as allowing for retribution, deterring bad behavior, and generally supporting the rule of law. These sort of punishements can represent a sizable windfall. So another argument made by supporters is that it makes people more likely to pursue a claim, thereby keeping others more honest.

  • Critics believe they open the door for injustice, unreasonable demands, and generally don't serve the public good. Another charge leveled by the “anti” crowd is that courts and juries often make decisions about punitive damages based on bias or emotion and not on the law.

When Are Punitive Damages Awarded?

Typically they are reserved for special cases when a wrongdoer commits an act that is particularly serious, malicious, violent, or fraudulent. Tort law generally allows for punitive damages to be sought in these cases, but it does specifically limit the situations where it is applicable. It varies depending on state statute, but generally, these are:

  • Gross negligence
  • Negligence motivated by fraud
  • Negligence motivated by financial gain

State laws also set an upper limit on the amount of financial compensation that can be awarded. Some states preset a ratio between the amount of actual damages and punitive damages to make sure things are “reasonable”. Other jurisdictions give consideration to a defendant's financial means and ability to pay.

Most states are at a ratio of no more than 3x the actual damages and the U.S. Supreme Court has capped this ratio at 10x.

What Evidence Do You Need to Receive Punitive Damages?

To prove a claim for punitive damage you (or your attorney) is going to need some very clear and convincing evidence. It's likely that you will have to demonstrate that it is much more reasonable than not that the other party behaved or acted in the way that you allege.

Some state laws require that in order for compensation to be awarded negligence must be proven to be intentional, consciousness, or otherwise planned. Courts typically look at these cases with an extra level of rigor.

So, to put it bluntly, you'll need a rock solid case.

3 Examples of Punitive Damages

Let's look at a few examples that may further explain the basic concepts:

Example 1

Driver A blows through a red light and sideswipes a minivan driven by a mom and her two kids. The van is totaled and injuries are sustained. The driver is drunk and has a history of DUI related accidents. As a result of the accident driver A may face criminal penalties which essentially serve the same punishment function as punitive damages. But he may also be on the hook for additional civil damages as well.

Example 2

An auto manufacturer produces a line of vehicles that has a percentage of faulty seat belts. There is an accident involving injuries and the passenger in the vehicle in question brings a lawsuit against the manufacturer of the seat belt. The manufacturer could easily pay the $5,000 in medical bills, so the court may impose punitive damages as well to prevent this behavior in the future and make the claim sting a bit more.

Example 3

Driver A is a 19-year-old college student. One of his hobbies is racing his car, which he does often late in the evening. This illegal form of street racing leads to driver A intentionally driving in a reckless manner. Eventually, his luck runs out and he gets into a head-on collision. The medical bills on both sides are quite steep. Driver A is lucky there are no fatalities. The court may decide that paying actual damages is enough or perhaps they will levy additional costs to punish driver A's foolhardiness.

Summary

Punitive damages don't often factor into personal injury or auto accident cases. But when they do, it's probably a serious or high-value claim and therefore critically important to understand them.

Seeking an experienced attorney is the most important thing you can do in this scenario. The second most important thing is to educate yourself. To review :

  • They are a financial punishment given to one party for particularly malicious or harmful behavior which is aimed at stopping it from happening again.

  • You need clear and convincing evidence to support a claim for punitive damages. State laws vary but sometimes you will need to prove intent as well.

  • Drunk driving, reckless driving, and the production of defective products are all examples of situations where punitive damages can be assessed.


Sources:

1 - Cornell Law School


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