What’s the difference between Punitive and Compensatory Damages

When you’re involved in a car accident, you have to deal with a lot. You’ll likely have medical treatment to worry about, you’ll probably have to find a new car, and there’s a good chance you’ll be looking for an attorney. And of course, you’ll probably be dealing with an insurance company that’s not on your side. The last thing you’ll want to do is figure out confusing Personal Injury terminology.. Two terms that can be particularly confusing are punitive and compensatory. But, as we will explain here, they are less complicated than they may seem.

Punitive damages. Punitive damages are intended to punish someone for something they did wrong. Punitive damages are often well-known. If you’re over 30, you probably remember the case of the elderly woman who sought millions of dollars for spilling hot coffee from McDonald’s on herself. That was absurd, right? Actually, no. There is a lot of misinformation about this case, even to this day. The incident occurred in 1992, and there are still people who believe that the plaintiff, Stella Liebeck, was just money hungry. In reality, the restaurant was found to be negligent, and Stella offered to settle the case for $20,000 to cover the cost of her medical bills. After going back in forth with the lawyers representing McDonald’s, the case went to trial. McDonald’s was found to be negligent, and the jury awarded Stella Liebeck 2.7 million dollars in punitive damages to punish them for what they did wrong.

If you’d like to read more about the infamous McDonald’s lawsuit, read our in-depth blog here.

Punitive damages are intended to punish and also, in some cases, create change. It’s safe to say that after this lawsuit, McDonald’s paid more attention to their coffee temperatures. The thing to remember, though, is that the plaintiff was originally seeking just $20,000 to cover her medical bills. The jury awarded more than she was seeking.  The original amount requested, $20,000, would be considered compensatory damages.

Compensatory damages. Often referred to as “actual damages,” compensatory damages are intended to compensate an individual for an actual loss. Compensatory damages are separated into two categories: economic and non-economic damages.  They can include property damage, economic loss, or injuries. Economic damages refer to compensation for objectively verifiable monetary losses such as past and future medical expenses, loss of past and future earnings, loss of use of property, costs of repair or replacement, the economic value of domestic services, and loss of employment or business opportunities. For instance, if you’re involved in an accident and the other individual damages your car, he or she may have to pay for the damage to your car. This would be a form of economic compensatory damages. If the individual caused $5,000 worth of damages to your car, he or she would have to pay that amount. (In most cases, their insurance company would be paying for the damage.)

Non-economic damages refer to compensation for subjective, non-monetary losses such as pain, suffering, inconvenience, emotional distress, loss of society and companionship, loss of consortium, and loss of enjoyment of life.

Here are some examples of Non-Economic damages:

• Pain and suffering – physical distress caused by an injury, including aches and pains, scarring, permanent or temporary limitations on activity.
• Emotional distress – emotional distress caused by a physical injury, physical contact, sexual harassment, libel, or slander.
• Loss of consortium – being deprived of the benefits of a normal family relationship due to an injury or death caused by the acts of another. Also referred to as “loss of companionship,” this may be the inability of a spouse to provide the same love and affection, comfort, society, or sexual relations as he or she did before the injury.
• Defamation – the intentional communication, whether written or spoken, of false information that harms the reputation of a person or entity.
• Loss or impairment of physical or mental capacity – the loss of a person’s ability to physically care for himself, or to think clearly or make decisions for himself.
• Loss of enjoyment of life – loss of a person’s ability to participate in and enjoy the activities and pleasures of life as experienced prior to the injury.

If you want to know more about compensatory damages, call us today for a free consultation. Our toll-free number is 1-877-526-3457. If you’d rather communicate electronically, fill out this form so we can contact you at a better time.