Exploring the Differences of Compensatory and Punitive Damages

Monday, May 8, 2017

Exploring the Differences of Compensatory and Punitive Damages

Written by Malman Law, reviewed by Steve J. Malman.

Chicago Accident Attorney Explains the Difference in Compensatory Damages and Punitive Damages

After an accident, you might find yourself inundated with endless expenses. Naturally, because of your injuries, you are working less or not at all. So, you seek compensation to cover those medical costs, property damage, and your loss of income. In order to get compensation, you file a personal injury claim, wherein you seek damages. Damages come in two broad categories: Compensatory and punitive.

From there, compensatory damages are further broken down, while punitive damages stay relatively simple. Despite how many various forms of compensation are available to you, it is critical to understand that not all claims qualify for the same benefits. Furthermore, your case might receive more or less than a similar accident, based on the facts, evidence, and so forth.

Compensatory Versus Punitive Damages: A Quick Look

Compensatory and punitive damages are not the same. Each is awarded separately by the judge or jury overseeing the case. When examining these forms of damages, there are two distinct differences:

• Compensatory Damages – Tort law provides for private parties seeking compensation after an injury. They recover compensatory damages because of tort. Depending on the evidence and facts, damages may be available for physical injuries, medical costs, lost wages or benefits, the harm of intangible property, reputation, and physical or emotional distress.
• Punitive Damages – When a defendant’s actions are bad, the injured victim might recover punitive damages. However, these are reserved for instances of extreme gross negligence or purposeful acts. Furthermore, punitive damages are not given to the victim as a way to compensate; instead, they serve as punishment for the defendant and as a symbol of what happens to others who attempt similar acts. Punitive damages are highly controversial, but have grown in popularity.

Comparative Negligence and Compensatory Damages

The state of Illinois deploys the comparative negligence rule. This affects a person’s compensation in a personal injury claim. Under the modified comparative negligence and pursuant to 735 ILCS 5/2-1116, an injured party can recover damages only if they are 50 percent or less at fault for their injuries. If the judge or jury determines that they are 51 percent or higher, they cannot collect compensatory damages.

If a victim has any percentage of fault assigned to him or her under modified comparative fault law, that percentage will reduce compensatory damages. For example, say a victim is provided $100,000 in compensatory damages, but the courts determine him or her to be 10 percent at fault for injuries. Therefore, 10 percent of the $100,000, or $20,000, is deducted from the settlement and the victim receives $90,000. Victims might have a percentage of comparative negligence assigned if they fail to exercise reasonable care for their safety.

Sadly, many defense attorneys use comparative negligence as a defense to lower a victim’s compensation. It is important, then, that an accident victim seeks legal representation to ensure the settlement is not decreased based on a false argument from the defense.

Assumption of Risk and Compensatory Damages

Another defense that might lessen or eliminate compensatory damages is the “assumption of risk” theory. This means that the victim voluntarily consented to a known danger. Therefore, the defense might argue that they should not be liable for damages because an assumption of risk was present.

Exploring Compensatory Damages

Compensatory damages consist of one to three possible items, including:

Loss in Value

The loss in value of the plaintiff’s performance – a performance they have the right to expect – is assessed. This is typically seen in a breach of contract lawsuit, and not used in accident claims.

Economic Damages

Economic damages are the direct result of the negligent act. These damages are easily calculated and refer to tangible losses that the plaintiff endures. Often, the plaintiff has bills and receipts for these costs, making it easy to prove the losses to the court.

Some forms of economic damages include, but are not limited to:

• Medical Costs – Including surgeries, hospitalizations, treatments, follow-up care, emergency room care, pharmacy services, medical equipment, and any other medical treatment or procedure associated with the accident.
• Loss of Wages – Includes all lost income the plaintiff endures because he or she is unable to work while recovering from the injuries. This also includes any wages lost to attend doctor’s appointments and court hearings.
• Loss of Future Earnings or Loss of Earning Capacity – This is reserved for plaintiffs who are partially or permanently disabled and either cannot work or cannot function in the same earning bracket as before. Future wages are compensated.
• Loss of Personal Property – Personal property might be lost or damaged in an accident, so the victim receives the market value of those items.
• Legal or Attorney Fees – Attorney fees, costs for travel, and court fees are included in this compensation calculation.

Non-Economic Damages

Non-economic damages are those that cover intangible costs endured by the plaintiff. These non-economic damages do not have receipts; they are usually projected by multipliers of the economic damages.

Some forms of non-economic damages might include:

• Pain and Suffering – Pain and suffering are the damages awarded to a plaintiff for physical and mental pain. These are difficult to calculate because it is hard to put a price on someone’s suffering – or prove that such suffering exists.
• Emotional Distress – Emotional distress, also referred to as mental anguish, is very serious. It is common after an accident, especially a catastrophic injury, to suffer from emotional distress. Some forms of distress include PTSD, anxiety, depression, and so on. A loss of enjoyment of life or hobbies can also be included in emotional distress damages.

What Are Punitive Damages?

Punitive damages are awarded when the judge or jury feels the defendant’s actions warrant punishment. Not all cases qualify for punitive damages, and rarely are they seen unless there was gross negligence or malicious intent. A minuscule margin of personal injury cases see punitive damages, and these are often just a few thousand dollars, while there are rare instances of million-dollar punitive damage awards.

Some infamous cases where punitive damages were awarded include:

• Philip Morris USA vs. Williams
• State Farm Auto Insurance v. Campbell
• BMW of North America v. Gore

When Are Punitive Damages Awarded?

In rare instances when punitive damages are awarded, certain factors must be present. The acts of the defense must be reprehensible, and the defendant will serve as a public punishment example.

Certain elements which the court looks for when awarding punitive damages include:

• Other Damages – First, the plaintiff must receive other forms of damages, such as compensatory damages, to receive punitive damages. Punitive damages are not awarded alone.
• More than Negligent Acts – The defendant’s actions must be more than simple negligence. Instead, the actions must be intentional, malicious, or extremely negligent.
• Relative Proportions – The punitive damages must be in relative proportions to the compensatory damages. In excessive amounts, the punitive damage award could be considered unconstitutional.

How Punitive Damages Are Calculated

The courts do not have a specific calculation or formula for picking punitive damages. Naturally, the more harm and compensatory damages the plaintiff has, the higher the punitive award might be. Also, there are no limitations in Illinois on the maximum damages allowed in punitive form. However, the courts have struck down excessive awards. A single digit multiplier is more likely than double-digit multipliers to apply to punitive damages. However, the statute has no definition of “proportions” – thus, this leaves it to the discretion of the judge.

Typically, the punitive damages will not exceed four times the compensatory damage value. Therefore, if a plaintiff receives $100,000 in compensatory damages, the punitive damages would not exceed $400,000. Larger ratios, such as 10:1, are labeled unconstitutional.

Other Factors that Affect Punitive Damages

Other factors are taken into consideration by the court when determining punitive damages. These include, but are not limited to:

• The extent of the defendant’s actions.
• The difference of harm suffered by the plaintiff compared to the damage amount requested.
• Amounts of punitive damages awarded in similar cases from case law.

High amounts of punitive damages are only awarded in special cases, such as:

• Cases with non-economic damages so substantial that they are too difficult to calculate.
• Injuries that are difficult to prove, but have other forms of evidence.
• Conduct by the defendant that was extremely offensive.

Speak with a Personal Injury Attorney in Chicago to Learn About Your Compensation

After your injury, it is imperative that you speak with a personal injury attorney in Chicago. Malman Law’s team of injury advocates will help calculate what damages you are entitled to, and discuss options for the types of damages you might claim.

Schedule a free, no-obligation consultation with an injury attorney from Malman Law today. You can contact an attorney 24 hours per day, seven days per week. Call now or ask us a question online.