Compensatory vs Punitive Damages

Thursday, April 27, 2023

Compensatory vs Punitive Damages

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

There are many different reasons that people might decide to initiate a personal injury claim. For example, when someone is injured in an accident and believes that another party is at fault, they may attempt to claim damages in order to pay for expensive medical bills related to the accident. 

Regardless of the reason, when exploring your options for a personal injury claim, you may find yourself trying to understand the two categories of damages: compensatory and punitive. Sorting out the differences between these two terms can help to avoid confusion as your claim progresses. 

Compensatory damages, otherwise referred to as general or actual damages, are damages that are awarded by the court that are based on the losses that the plaintiff faces. Compensatory damages are often awarded for pain and suffering, medical expenses, and loss of earnings. These are typically a substantial piece of a personal injury claim. 

Punitive damages, also referred to as exemplary damages, carry a two-fold purpose: to punish the defendant for their behavior and to deter others in the public or in a similar situation from doing the same. Punitive damages are much different than compensatory damages, and they do not reimburse the plaintiff for any economic losses due to their injury. Punitive damages are more commonly sought after in a case that involves a company or another large entity.  

To learn what damages you might qualify for, speak with an injury lawyer in Chicago today. 

How Common are Punitive Damages?

While most personal injury claims successfully obtain compensatory damages, not all claims qualify for punitive damages. In fact, only about 5% of cases will qualify for punitive damages, while compensatory damages are much more common. In some cases, your claim may qualify for both compensatory and punitive damages. This is an area where your skilled attorney can help provide insight. It is also helpful to understand what is categorized as compensatory damages versus punitive damages and what the process is for evaluating and calculating the monetary compensation for each. 

Compensatory Damages

When it comes to a personal injury claim, the compensatory damages are based on losses that a plaintiff faces. These damages are meant to provide compensation for the loss that occurred. Some of the most common compensatory damages include but are not limited to:

• Medical expenses (past, current, and future) – this often includes medical bills for treatment of an injury, the cost of an ambulance ride, the cost of medication, medical devices, the expense of staying at the hospital for a short or extended amount of time, in-home care, and more.
• Lost wages – Often, injuries will require extended time off work to recover. Lost wages add stress to an already difficult situation, and compensation for the wages that were lost can help to ease the financial challenges of an injury.
• Loss of earning capacity – In addition to lost wages due to time off work, loss of future wages and potential earning capacity are other potential compensatory damages.
• Property damage – In some cases, there is damage to your car, bicycle, house, or other property in addition to the injuries that you sustained. In this case, compensatory damages might help to cover the monetary losses due to your damaged property in addition to your other damages.
• Pain and suffering – This refers to both physical and emotional stress that you’ve experienced due to your injuries. Some examples include physical pain, anger, depression, and inability to maintain your previous quality of life.

After compensatory damages have been calculated, the court will then decide if punitive damages are necessary and, if so, add the punitive damage award on top of the compensatory damage award.

Is “Pain and Suffering” Punitive Damage or Compensatory Damage? 

While pain and suffering may not seem like a loss that can be clearly calculated, it is categorized as compensatory damage. So how is a monetary amount assigned to the loss incurred by pain and suffering? This can vary from case to case, and most insurance companies have a multiplier formula that they use to come up with a number to offer. 

They will start by looking at the total value of your economic costs, such as lost wages and hospital bills, then they will multiply that by that number to come up with an offer for your pain and suffering. Typically, they multiply the total economic damages by anywhere between 1.5 and five, depending on how serious the injuries were. Specific evidence that outlines the severity of the pain and suffering can help increase the potential amount of the settlement.

Does My Case Qualify for Punitive Damages?

As mentioned above, punitive damages are not given in all personal injury claims – in fact, only a select few will ever see punitive damages. To receive punitive damages, the court must assess the facts of the claim, as well as the behavior or actions taken by the defendant.

When the defendant’s actions are considered reprehensible, punitive damages may be awarded as a punishment to the defendant. One example of a cause for punitive damages being awarded is distracted or drunk driving. If the court decides that the defendant made a willing choice to engage in this action and that this negligent behavior could have hurt others as well, the case may qualify for punitive damages.

To determine if a case qualifies for punitive damages, the court will look specifically for the following elements:

1. The plaintiff must first be awarded other damages, such as compensatory damages or restitution damages. Punitive damages are never awarded on their own.
2. The defendant must have acted more than negligently; instead, their actions must be reprehensible, harmful, malicious, and/or intentional.

Also, Illinois is one of the states in the U.S where punitive damages are uninsurable, which means that they can’t be paid by the defendant’s insurance. In other states like Texas, where insurability is not settled, for instance, a vehicle accident case never makes it to trial because insurance companies are loath to pay the extreme costs of going to trial, so it will typically result in a settlement that should be in line with your expected jury award.

Are Punitive Damages Beneficial?

The purpose of punitive damages is to acknowledge dangerous, harmful behavior and to prevent the defendant from repeating these actions in the future. Punitive damages are beneficial as they are meant to protect others from experiencing the same damages. They are intended to punish the defendant for their actions and also to serve as an example, hence the term “exemplary damages.”

Ideally, setting an example will show others who are engaging in the same dangerous behavior that there can be serious consequences for these actions. Punitive damages that outline the financial consequences of an action can serve as an effective way to prevent these actions from happening and being repeated by others.

How Punitive Damages Are Calculated

When the court finds that the defendant’s action is more than just negligence, they will determine the amount of punitive damages. Punitive damages are awarded in relative proportion to compensatory damages. The actual amount is typically based on the degree of seriousness of the acts that resulted in harm to the plaintiff. 

Maximizing the amount of punitive damages often depends on the evidence and the arguments brought forth to show the severity of the harm caused by the defendant’s actions. This is one reason it is advisable to work with an experienced attorney who will advocate for their clients and work to outline the severity of the damages incurred. 

However, note that punitive damages are capped in Illinois – they cannot exceed three times the amount of general damages under Illinois statutes. For example, for small verdicts, which are less than $100,000, punitive damages cannot exceed $300,000. These damage caps do not apply to product liability claims or bad faith claims; in these cases, the punitive damage amount could be higher depending on the severity of the situation.

Exploring Your Options for Compensation

Many people who are dealing with painful injuries seek both compensatory and punitive damages. If you have a potential personal injury claim, you’re not alone. Reach out and schedule a time to speak with an attorney at Malman Law today. Our attorneys can assess the facts of your case and determine if you may be eligible to receive punitive damages on top of the prospective compensatory damage amount. 

Don’t delay in learning more about your options to just compensation. Call for a free consultation appointment at 888-247-2160 or fill out an online contact form with your questions.