Exemplary damages are another term for punitive damages. They are given to deter the defendant and others from engaging in conduct similar to that which led to the lawsuit, as well as to punish the defendant. They are frequently given in order to set a public example. Punitive damages are rarely awarded, but they may be appropriate in many cases where compensatory damages would be insufficient because the defendant acted in a particularly egregious manner. Some states have passed split-recovery statutes, in which the state receives a portion of the punitive damages award rather than the plaintiff.
Unlike compensatory damages, punitive damages are awarded to punish the wrongdoer rather than compensate the injured party.
Punitive damages are usually higher than compensatory damages. They are typically only awarded in cases involving tort law, such as personal injury or medical malpractice, rather than cases involving a contract dispute. However, in some insurance bad faith cases that arise under an insurance policy, punitive damages are awarded. This is because the insurer’s breach of contract in some cases is so egregious that it violates the implied covenant of good faith and fair dealing, which is a tort.
The jury will decide on the amount of punitive damages. Most juries are instructed to consider both objective and subjective factors in most cases. The nature of the plaintiff’s injury, the reprehensibility of the defendant’s misconduct, the amount of punitive damages that would deter the defendant based on the defendant’s wealth, and the reprehensibility of the defendant’s misconduct are all factors to consider. Defendants frequently request that the jury be instructed to consider whether the punitive damages are reasonable in relation to the plaintiff’s injury.
Punitive damages, according to some proponents of tort reform, should be limited to cases involving actual malice. Punitive damages are awarded in most states when the defendant’s actions are willful, malicious, oppressive, fraudulent, or reckless. In a products liability case, punitive damages may be awarded if the defendant is a corporate drug manufacturer who knowingly sells drugs with long-term harmful side effects without warning. Punitive damages have also been awarded in cases where a religious institution was aware of a clergyman sexually molesting children and shuffled him to another parish without informing parishioners.
Punitive damages may also be appropriate in a premises liability case where an apartment complex knows that the gate to an otherwise unguarded swimming pool is broken but fails to fix it despite the fact that the complex has a large number of toddlers. Punitive damages may also be appropriate when a driver with three prior DUI convictions kills another person while driving drunk on a suspended license.
Punitive Damages: Are There Any Limits?
A defendant’s financial situation is inadmissible when determining compensatory damages. When it comes to punitive damages, on the other hand, the jury is supposed to take into account the defendant’s wealth or financial situation when determining the appropriate amount to be awarded. Punitive damages awards for wealthy or corporate wrongdoers are typically higher than for less wealthy defendants because it will take more to deter them from repeating the same behavior in the future.
In comparison to compensatory damages, a punitive damages award may be deemed excessive.
In many states, the amount of punitive damages that can be awarded is limited. In California, for example, some courts have set a limit on punitive damages, limiting them to no more than 10% of a defendant’s net worth. Punitive damages awards in other states must have a reasonable relationship to compensatory damages. They can’t be more than two or three times as much as the compensatory damages.
Punitive damages four times the amount of compensatory damages are close to excessive, but still constitutional, according to the United States Supreme Court. However, the Court has overturned a punitive damages award in which the ratio of punitive to compensatory damages was 145:1, claiming that it violated the Fourteenth Amendment’s Due Process Clause. The Court suggested that a jury would be unlikely to be justified in awarding a punitive-to-compensatory damages ratio greater than a single digit.
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