Punitive damages and compensatory damages – Understanding the difference

May 21, 2021

Punitive damages and compensatory damages – Understanding the difference

punitive damages

Punitive Damages vs Compensatory Damages. When you or your loved ones get into an accident, caused by someone else (individual, business or entity) it’s possible that you can receive compensation for the sustained injuries or losses. Getting compensation for injuries can be difficult and confusing, particularly if you don’t what type of damage can you receive. Today we will be focusing on the two main types of damages – compensatory damages and punitive damages.

What are compensatory damages?

Damages that were caused directly by the accident and that a person can receive compensation for, are known as compensatory damages. These kinds of damages can be further divided into economic and non-economic damages.

Economic or special damages, revolve around compensation that can be easily calculated. A good example of economic damages are your medical bills after the accident, lost wages, property damages or other expenses.

Non-economic damages can also be called general damages and represent compensation that cannot be easily calculated and represented in a specific monetary value. A good example of non-economic damage is a person’s pain and suffering, diminished quality of life, lost earning capacity and so on.

Economic damages can be calculated fairy easily. You simply gather all bills and add them up until you reach the total. Non-economic damages on the other hand, are calculated by using a so-called multiplier method where you take all the economic damages and multiply them by a set number, which can range between 1.5 and 5.

Let’s say that your economic damages are $10,000 and you use a multiplier of 3 in order to calculate your non-economic damages. This means that your non-economic damages are $30,000 and your total damages (both economic and non-economic) are $40,000.

What are punitive damages?

Punitive damages are not like other types of damages that can be awarded in your personal injury case. They are “special” and exemplary damages, and are only awarded in cases where the defendant (person or entity at-fault) is found to be grossly negligent or that he/she/it caused harm to the plaintiff intentionally. Punitive damages are actually most common when someone’s injuries have been caused by illegal behavior. In these cases, the punitive damages are separate from the criminal penalty that the defendant might face.

Of course, this doesn’t mean that punitive damages are solely applied for criminal behavior. In fact, there are non-criminal cases where punitive damages can be awarded. For example, if a company knowingly sold a defective product, awarding punitive damage could be an effective way of warning that this type of behavior is unacceptable.

Does Arizona limit damages?

Some US states limit the amount of compensation one can receive in a personal injury case. For example, in California in case of medical malpractice, non-economic damages are limited to $250,000 but in other types of cases, there are not limitations on both economic and non-economic damages.

But Arizona is a bit different. The Arizona constitution specifically prohibits damage caps. Article 2, Section 31 of the Arizona Constitution clearly states that:

“No law shall be enacted in this state limiting the amount of damages to be recovered for causing the death or injury of any person”

We hope that this made clearer the different between compensatory and punitive damages. IF you or your loved one were victim to an accident, caused by another party’s negligent or irresponsible behavior, contact our experienced attorney for a free consultation.

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