Legal Dictionary

punitive damages

Legal Definition of punitive damages

Noun

Special and highly exceptional damages ordered by a court against a defendant where the act or omission which caused the suit, was of a particularly heinous, malicious or highhanded nature. Where awarded, they are an exception to the rule that damages are to compensate not to punish. The exact threshold of punitive damages varies from jurisdiction to jurisdiction. In some countries, and in certain circumstances, punitive damages might even be available for breach of contract cases but, again, only for the exceptional cases where the court wants to give a strong message to the community that similar conduct will be severely punished. They are most common in intentional torts such as rape, battery or defamation. Some jurisdictions prefer using the word "exemplary damages" and there is an ongoing legal debate whether there is a distinction to be made between the two and even with the concept of aggravated damages.

Damages awarded in cases of malicious or serious wrongdoing to deter or punish the wrongdoer or deter others from behaving similarly. Also called "Exemplary Damages" or "Smart Money".

Related terms

Definition of punitive damages

Further reading

Punitive damages (termed exemplary damages in the United Kingdom) are damages intended to reform or deter the defendant and others from engaging in conduct similar to that which formed the basis of the lawsuit. Although the purpose of punitive damages is not to compensate the plaintiff, the plaintiff will in fact receive all or some portion of the punitive damage award.

Punitive damages are often awarded where compensatory damages are deemed an inadequate remedy. The court may impose them to prevent under-compensation of plaintiffs, to allow redress for undetectable torts and taking some strain away from the criminal justice system. However, punitive damages awarded under court systems that recognize them may be difficult to enforce in jurisdictions that do not recognize them. For example, punitive damages awarded to one party in a US case would be difficult to get recognition for in a European court, where punitive damages are most likely to be considered to violate ordre public.

Because they usually compensate the plaintiff in excess of the plaintiff's provable injuries, punitive damages are awarded only in special cases, usually under tort law, where the defendant's conduct was egregiously insidious. Punitive damages cannot generally be awarded in contract disputes. The main exception is in insurance bad faith cases in the United States, where the insurer's breach of contract is alleged to be so egregious as to amount to a breach of the "implied covenant of good faith and fair dealing," and is therefore considered to be a tort cause of action eligible for punitive damages (in excess of the value of the insurance policy).

In the U.S., there is no maximum dollar amount of punitive damages that a defendant can be ordered to pay. Instead, appellate courts often look at the ratio of punitive damages to compensatory damages. Only in rare cases is a punitive damages award of more than 4 times the compensatory damages justifiable.

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