Tuesday, March 12, 2013

Punitive vs compensitory damages vs pain and suffering awards...What's the difference?


Compensatory or expectation damages

Compensatory damages, called actual damages, are paid to compensate the claimant for loss, injury, or harm suffered as a result of (see requirement of causation) another's breach of duty. (e.g., in a negligence claim under tort law). Expectation damages are used in contract law.

Pain and suffering is the legal term for the physical and emotional stress caused from an injury

Some damages that might be under this category would be: aches, temporary and permanent limitations on activity, potential shortening of life, depression or scarring. When filing a lawsuit as a result of an injury, it is common for someone to seek money both in compensation for actual money that is lost and for the pain and stress associated with virtually any injury. In a suit, pain and suffering is part of the "general damages" section of the claimant's claim, or, alternatively, it is an element of "compensatory" non-economic damages that allows recovery for the mental anguish and/or physical pain endured by the claimant as a result of injury for which the plaintiff seeks redress.

Apart from money damages awarded in trial, money damages are also given informally outside the judicial system in mediations, arbitration (both of which may be court annexed or non litigated claims) as well as in routine insurance settlements. Individual claimants or those represented by lawyers often present demands to insurers to settle for money. These demand for bodily injury compensation monies often set out damages that are similarly used in the court litigated pleadings. Demands are usually written summaries of a claimant's medical care and the facts which resulted in the injury

Size of Settlement for Pain and Suffering

The settlement a person receives for their pain and suffering depends on many factors. This includes the severity of the injury, type of medical treatment received, the length of recovery time, and potential long term consequences of the personal injuries. In addition to physical pain, claimants can also cite emotional and psychological trauma in their pain and suffering claims. For example, a visible scar on the face can lead to painful feelings of constant embarrassment and insecurity.[1]
The amount of money damages a claimant gets for pain and suffering will also depend upon the amount claimed in a lawsuit if such is filed or the amount demanded to the responsible party in the underlying claim if it is an insurance claim. Even though a lawyer representing a client in an injury negligence-based lawsuit may claim a certain amount for pain and suffering, the jury or the insurance adjuster will award pain and suffering money for differing reasons.

Jury awards for pain and suffering vary depending upon the socio-economic and political factors motivating them at the time in the particular jurisdiction of the suit.[citation needed] In most states the maximum monetary amount awarded for pain and suffering is capped at what is listed in the particular suit or written complaint. In some jurisdictions there are maximum amounts set in law which a jury may not exceed in awarding damages.

The personality of the plaintiff, their witnesses and overall effect of the injuries which befell the victim plaintiff will play a powerful role in any damage award if damages are even awarded once liability issues are satisfied. The power and personality of the lawyer representing her or his client also may factor into a high money damage award case.

Punitive damages or exemplary damages

 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.[1] 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.[2]

Because they are usually paid 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).[3]

United States law for pain and suffering

Punitive damages are a settled principle of common law in the United States.[16] They are generally a matter of state law (although they can also be awarded under Federal maritime law), and thus differ in application from state to state. In many states, including California and Texas, punitive damages are determined based on statute; elsewhere, they may be determined solely based on case law. Many state statutes are the result of insurance industry lobbying to impose "caps" on punitive damages; however, several state courts have struck down these statutory caps as unconstitutional.[17]

The general rule is that punitive damages cannot be awarded for breach of contract. But if an independent tort is committed in a contractual setting, punitive damages can be awarded for the tort.[18] Punitive damages are usually reserved for when the defendant has displayed actual intent to cause harm (such as purposefully rear-ending someone else's car), rather than in cases of mere negligence.[19]

Punitive damages are a focal point of the tort reform debate in the United States, where numerous highly publicized multi-million dollar verdicts have led to a fairly common perception that punitive damage awards tend to be excessive. However, statistical studies by law professors and the Department of Justice have found that punitive damages are only awarded in two percent of civil cases which go to trial, and that the median punitive damage award is between $38,000 and $50,000.[17]

There is no maximum dollar amount of punitive damages that a defendant can be ordered to pay. In response to judges and juries which award high punitive damages verdicts, the Supreme Court of the United States has made several decisions which limit awards of punitive damages through the due process of law clauses of the Fifth and Fourteenth Amendments to the United States Constitution. In a number of cases, the Court has indicated that a 4:1 ratio between punitive and compensatory damages is high enough to lead to a finding of constitutional impropriety, and that any ratio of 10:1 or higher is almost certainly unconstitutional. However, the Supreme Court carved out a notable exception to this rule of proportionality in the case of TXO Production Corp. v. Alliance Resources Corp., where it affirmed an award of $10 million in punitive damages, despite the compensatory damages being only $19,000, a punitive-to-compensatory ratio of more than 526 to 1. In this case, the Supreme Court affirmed that disproportionate punitive damages were allowed for especially egregious conduct (the trial court in the same case purportedly said "What could be more egregious than the vice president of a company saying, well, testifying and saying that he knew all along that this property belonged to Tug Fork?")[20]

In the case of Liebeck v. McDonald's Restaurants (1994), 79 year old Stella Liebeck spilled McDonald's coffee in her lap which resulted in second and third degree burns on her thighs, buttocks, groin and genitals. The burns were severe enough to require skin grafts. Liebeck attempted to have McDonald's pay her $20,000 medical bills as indemnity for the incident. McDonald's refused, and Liebeck sued. During the case's discovery process, internal documents from McDonald's revealed the company had received hundreds of similar complaints from customers claiming McDonald's coffee caused severe burns. At trial, this led the jury to find McDonald's knew their product was dangerous and injuring their customers, and that the company had done nothing to correct the problem. The jury decided on $200,000 in compensatory damages, but attributed 20 percent of the fault to Liebeck, reducing her compensation to $160,000. The jury also awarded Liebeck $2.7 million in punitive damages, which was at the time two days of McDonald's coffee sales revenue. The judge later reduced the punitive damages to $480,000. The case is often criticized for the very high amount of damages the jury awarded.

In BMW of North America, Inc. v. Gore (1996), the Court ruled that an excessive punitive award can amount to an arbitrary deprivation of property in violation of due process. The Court held that punitive damages must be reasonable, as determined by the degree of reprehensibility of the conduct that caused the plaintiff's injury, the ratio of punitive damages to compensatory damages, and any comparable criminal or civil penalties applicable to the conduct. In State Farm Auto. Ins. v. Campbell (2003), the Court held that punitive damages may only be based on the acts of the defendants which harmed the plaintiffs. The Court also elaborated on the factors courts must apply when reviewing a punitive award under due process principles.

Most recently, in Philip Morris USA v. Williams (2007), the Court ruled that punitive damage awards cannot be imposed for the direct harm that the misconduct caused others, but may consider harm to others as a function of determining how reprehensible it was. More reprehensible misconduct justifies a larger punitive damage award, just as a repeat offender in criminal law may be punished with a tougher sentence. Dissenting in the Williams case, Justice John Paul Stevens found that the "nuance eludes me," suggesting that the majority had resolved the case on a distinction that makes no difference.

1 comment:

  1. You have described beautifully the difference between compensitory damages, pain and suffereing and exemplary damages in this post.

    ReplyDelete