What Is The Difference Between Compensatory Damages and Punitive Damages?



The law prescribes a certain degree of diligence for the conduct of every person. A person is required to exercise the care and diligence of a prudent person looking out for the interest of himself and others around him. Hence, a person must not only look out for his own safety but also consider the safety of those around him. A person who fails to comply with these standards of conduct is said to be negligent and can be subjected to legal sanctions such as fines, forfeiture of privilege, and even imprisonment.

In car crash accidents, the negligent person who is responsible for the accident is duty bound to pay the victim a certain amount of compensation. This amount is usually given in a lump sum. However, in strict legal terms, the components of that amount can be broken down into specific items. Generally, there is a set of payment termed as compensatory damage. This type of compensation answers for the losses and expenses incurred by the victim. This will include the repair for the wrecked car, medical bills, lost income, as well as other losses directly or indirectly attributable to the accident. This restores the person to his/her previous financial state.

An example would be a person who is driving a car and gets rear-ended by a truck and, as a result, suffers of contusion and had to stay in the hospital for a few days. The injured person can demand payment from the truck driver for the repair or replacement of his wrecked car, the medical and hospitalization bills, as well as the wages he/she lost because as a result of being hospitalized. Compensatory damages are, as a rule, granted provided the claimant presents sufficient documentary evidence such as receipts and other vouchers.

In addition to compensatory damages, the court may also award punitive damages. This is another type of damage that serves as punishment to the negligent offender and a deterrent to future offenders. It is generally an exorbitant amount in order to penalize the offender and dissuade them from committing the same negligent act. The second purpose of punitive damage is to make an example of the negligent offender so that other people will not be encouraged to act in the same negligent way. Punitive damages deter possible offenders from committing the same mistake by radically increasing the cost and inconvenience of doing the same negligent act.

Unlike compensatory damages that can be calculated by presenting the relevant receipts and information, the value of the punitive damages is discretionary upon the court. The court has wide scope in determining the amount of the award; as long as the amount is reasonable the decision of the court will be upheld. Previous cases have enumerated some conditions that the court looks at in fixing the amount of punitive damage. The court will usually consider the surrounding circumstances; whether the offender acted with bad faith, violence, malice, fraud or other peculiar conditions. An offender who flees the sight of the accident and abandons a victim in distress will usually be imposed a higher punitive damage than a person who extended help to his victim.