Jim Adler | The Tough, Smart Lawyer
By Jim Adler March 24, 2016

If you find yourself navigating the legal seas to get a settlement for your pain and suffering, you will be introduced to the terms “compensatory,” “punitive,” “nominal,” and “liquidated” damages. Nominal damages are often awarded when the court is trying to make a point about the case in general or to one of the parties involved, and it is often an amount somewhere near one dollar. Liquidated damages are outlined directly in contracts, and the courts must decide how much is to be awarded to the plaintiff in liquidated damages based on the conditions of the contract. Those two types of damages are fairly straightforward, but compensatory and punitive damages are a bit more difficult to explain.

Compensatory damages (also referred to as actual damages) are awards given to pay for any income lost as a result of the defendant’s actions. These would include lost income, the cost of property damage, and medical costs both immediate and long-term. When it comes to compensatory damages, the courts have an easy task, as these awards are tied to paperwork provided by the plaintiff in regard to amounts of money that were lost as a result of the negligent action.

Punitive damages are awards intended to punish the defendant for their actions and cannot be awarded without there being a compensatory award first. Punitive damages are what most people refer to as “pain and suffering,” and they are awarded solely at the discretion of the court. In most states, there is a 4:1 ratio between punitive and compensatory damages that is used as a formula by the court. If the compensatory damages are $50,000 and the court feels that punitive damages are appropriate, then that damage amount will usually be around $200,000. In the past, judgments that have awarded punitive damages with a ratio of more than 10:1 have been overturned as unconstitutional. In order for a plaintiff to be awarded punitive damages, the court must be able to determine that the acts of the defendant were intentional and those acts resulted in real pain and suffering for the plaintiff.

The primary point of contention when it comes to determining punitive damages is assigning negligence. The purpose of punitive damages is to punish the defendant and create a financial award for the plaintiff that will deter the defendant from ever committing a similar act of negligence in the future. In determining the negligence of the defendant, courts will also consider the contributory negligence of the plaintiff. If it is determine that the plaintiff contributed to the negligent act in some way, whether intentional or unintentional, then that will affect whether or not there are punitive damages handed out. In most states, courts will assign a percentage of contributory negligence to the plaintiff and then use that percentage to determine how much of the final compensation is actually awarded. For example, if the court determines 20 percent contributory negligence on a possible award of $100,000, then the plaintiff would get $80,000.

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