Actual Damages vs Punitive Damages: Everything You Need to Know
Actual damages vs. punitive damages are the two main types of damages awarded in civil court cases. 3 min read
Actual damages vs. punitive damages are the two main types of damages awarded in civil court cases. While courts grant actual damages to plaintiffs to compensate them for a loss they have suffered, they impose punitive damages on a defendant to discourage the behavior that led to the defendant being sued in the first place.
The plaintiff receives compensation from both actual damages and punitive damages, but there are certain differences in how a court awards them.
Actual damages, which are also sometimes called compensatory damages, are designed to return the plaintiff to the position they were in before they experienced an injury or loss. The plaintiffs, therefore, have a responsibility to prove to the court that they suffered a loss, such as from a robbery, car accident, or breach of contract.
Courts may award you compensation for:
- Present and future medical bills
- Lost income or earning ability
- Pain and suffering or emotional distress
- Property damage
- Damage to the relationship with your children, spouse, or both
Some insurance companies may refer to actual damages as special damages. In addition, the term special damages can mean the amount of money lost by the plaintiff due to the injury caused by the defendant.
A decision by a judge to grant punitive damages in a civil case is often a contentious issue. This may be in part because punitive damages have to be paid by the defendant on top of any actual damages that the court awards to the plaintiff. An alternative name for them is exemplary damages.
If the court deems that the defendant has behaved recklessly or negligently, it can impose punitive damages as a punishment. The court makes a decision on how much punitive damages the defendant needs to pay. Unlike actual damages, the court does not calculate the amount to be paid using bills and other losses experienced by the plaintiff.
The awarding of punitive damages tends to be confined to tort cases, such as personal injury lawsuits. These can range from suits involving product liability, premises liability, or robbery. However, a judge may also consider awarding punitive damages in contract cases dealing with a dispute over insurance coverage.
What Is a Reasonable Punitive Damages Award?
Many people think that awards for punitive damages are always high because of high-profile cases reported in the media. This is contradicted by research from the U.S. Department of Justice, which found that only 2 percent of tort cases result in punitive damages and that the average award is below $50,000.
When deciding the amount of punitive damages to impose, a judge considers the facts of the case, as well as the amounts of criminal and civil penalties related to similar conduct.
In addition, they also take into account the ratio of punitive damages to actual damages. If the ratio is more than 4-1, courts are likely to question the amount of punitive damages awarded. According to the U.S. Supreme Court, cases in which punitive damages are 10 times or more than actual damages are almost certainly unconstitutional.
Sending a Message to Society
Although a judge orders an individual defendant to pay punitive damages to deter them from reckless or negligent conduct, such a decision is also supposed to set an example to others. The court wants to make clear that the type of behavior engaged in by the defendant is unacceptable and will be punished.
For example, imagine a car company knowingly sells vehicles with faulty brakes. In a case brought by injured drivers against the company, the judge orders the company to pay punitive damages, both as a punishment and to demonstrate to other automakers that they cannot sell vehicles with faulty brakes.
Other Types of Damages
Actual and punitive damages are only two types of damages a court can award. A judge may also award a plaintiff:
- Nominal damages, which are a token payment.
- Liquidated damages, which can be awarded if the defendant breached a contract.
A judge may also order the defendant to pay fees related to the case, including:
- Fees for expert witnesses
- Costs for court reporters
- Expenses for preparing exhibits
- Other legal fees
- Reproduction fees
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