What are punitive damages?

Punitive damages, also called exemplary damages, serve a unique purpose in civil lawsuits. Unlike compensatory damages, which aim to compensate the victim for their losses, punitive damages are specifically designed to punish the defendant for egregious behavior and are meant to deter similar wrongful behavior or negligent behavior in the future.

In this article, we will review what punitive damages are in more detail, the difference between punitive damages and other types of damages in personal injury lawsuits, and how punitive damages are awarded.

Compensatory vs. punitive damages

In order to fully understand punitive damages, it’s important to be familiar with other types of damages that can be awarded in a personal injury claim. As you now know, compensatory and punitive damages are different in that punitive damages are meant to punish defendants for gross negligence. However, in personal injury cases, punitive damages are not always awarded.

Typically, a personal injury victim will first seek what are called compensatory damages. These damages are meant to compensate victims with the goal of “making them whole”. In other words, compensatory damages aim to restore the injured party to the financial position they were in before the injury occurred by providing monetary compensation for their losses and expenses resulting from the defendant’s actions.

There are two types of compensatory damages

In a personal injury claim, a victim will often suffer different types of losses. On one hand, there are economic losses, which typically include damages that can be tied directly back to a bill or a receipt. Non-economic losses are not as straightforward in civil cases and typically require an experienced personal injury attorney to negotiate on the victim’s behalf.

Economic damages

Economic damages, also known as special damages, are a type of compensatory damages awarded in civil lawsuits to compensate the plaintiff for quantifiable financial losses incurred as a direct result of the defendant’s actions.

Examples of economic damages

Economic damages can include things like medical expenses and medical bills, lost wages and future lost earnings, property damage, funeral expenses in the case of wrongful death, and other expenses incurred by the plaintiff as a direct result of the defendant’s actions, such as transportation costs for medical appointments, home modifications required due to disability, and any other expenses directly related to the injury.

Non-Economic damages

Non-economic damages, also known as general damages, are a type of compensatory damage awarded in civil lawsuits to compensate the plaintiff for intangible losses that are not easily quantifiable in monetary terms. Unlike economic damages, which cover specific financial losses, non-economic damages are intended to compensate the plaintiff for the physical, emotional, and psychological impact of the injury or harm caused by the defendant’s actions. These damages seek to address the human aspects of suffering and loss experienced by the plaintiff.

Examples of non-economic damages

Non-economic damages include pain and suffering, emotional distress, loss of consortium, loss of enjoyment of life, shortened life expectancy, and scarring and disfigurement. These damages are subjective and should be negotiated by an experienced injury lawyer.

How common are punitive damages awarded?

Punitive damages are seldom granted, typically appearing in only about 3 to 5 percent of cases where plaintiffs secure victories in trials. There are many reasons for this, one being that courts typically impose a high threshold for awarding punitive damages. The plaintiff must demonstrate that the defendant’s conduct was particularly egregious, reckless, or malicious, often requiring clear and convincing evidence of intentional wrongdoing or extreme negligence.

When punitive damages are awarded, they still fall under guidelines. Also, the availability of punitive damages varies across states, as each state has its own set of criteria. Some states are more inclined to award punitive damages than others.

How are punitive damages calculated?

Punitive damages are calculated based on various factors, including the severity of the defendant’s misconduct, the extent of harm caused, and the defendant’s financial status. While there is no fixed formula for calculating punitive damages, courts typically consider the following factors:

Severity of Misconduct: The more egregious the defendant’s conduct, the higher the potential punitive damages. Courts assess the nature and extent of the defendant’s misconduct, including factors such as intent, recklessness, malice, and whether the conduct was a one-time occurrence or part of a pattern of behavior.

Harm Caused: The amount of harm suffered by the plaintiff is also a significant factor in determining punitive damages. Courts consider the extent of physical, emotional, and financial harm caused by the defendant’s actions, as well as any aggravating factors that exacerbate the harm.

Financial Status of the Defendant: Courts may consider the defendant’s financial resources when awarding punitive damages. Punitive damages are intended to punish the defendant effectively, so the award should be substantial enough to deter future misconduct while also taking into account the defendant’s ability to pay.

Ratio to Compensatory Damages: In some jurisdictions, courts consider the ratio between punitive and compensatory damages when determining the appropriate punitive damages award. While there is no fixed ratio, courts may look to ensure that the punitive damages award is not disproportionately excessive compared to the compensatory damages awarded to the plaintiff.

Statutory Limitations: Some states have statutory caps or limitations on punitive damages, which may impact the calculation of punitive damages awards. These caps vary by jurisdiction and may impose maximum limits on the amount of punitive damages that can be awarded in certain types of cases.

Overall, the calculation of punitive damages is a complex and discretionary process that takes into account various factors to ensure that the award is fair, proportionate, and consistent with the goals of punishment and deterrence. Courts have broad discretion in determining the amount of punitive damages, and the specific methodology used may vary depending on the circumstances of each case and the legal standards applicable in the jurisdiction.

Are there caps on punitive damages in Tennessee?

Yes, the Tennessee legislature has established a set limit on the punitive damages that can be recovered. For cases involving injury or death, punitive damages are capped at either $500,000 or twice the amount of compensatory damages awarded, depending on which sum is greater.

For example, a Nashville car accident lawyer could recover $150,000 in compensatory damages on behalf of a client, however if the victim is awarded punitive damages, the punitive damages cannot exceed $300,000.

A Tennessee personal injury lawyer can use all available evidence to argue for the defendant to pay punitive damages, though, because compensatory damages are awarded based on losses that the victim has suffered, and not meant punish defendants. Economic and non-economic awards are more common in a personal injury claim.

Are there caps on punitive damages in Kentucky?

In a Kentucky personal injury case, there are no limitations on the amount of punitive damages that may be awarded. The jury is responsible for determining the total punitive damage award, considering both economic and non-economic compensation for the injury victim. A Kentucky personal injury lawyer will be well versed in what is needed to pursue punitive damages.

For example, a Louisville car accident lawyer could recover $150,000 in compensatory damages on behalf of a client. Using the previous example in Tennessee, where punitive damage awards would be limited to $300,000, Kentucky does not have such caps, meaning that the amount of punitive damages awarded can be substantially higher.

It is important to note however that the Supreme Court has been clear that while the states have “broad discretion with respect to the imposition of punitive damages,” the Constitution’s Due Process Clause stops courts from giving punitive damages that are too big compared to the harm caused by the defendant or without proper procedures.

This means that even though states like Kentucky can decide when to give these damages, they have to follow certain rules to make sure they’re fair and reasonable.

Are punitive damages taxable in Kentucky?

Yes, punitive damages are taxable in Kentucky. Since punitive damages are not meant to “make the victim whole” but rather to penalize the wrongdoer, they are treated as additional income by the Internal Revenue Service (IRS) and are subject to taxation. Therefore, individuals who receive punitive damages in Kentucky are required to report them as taxable income on their state and federal tax returns.

Are punitive damages taxable in Tennessee?

Punitive damages are considered taxable income in Tennessee because they are not intended to compensate for actual losses or expenses incurred by the plaintiff. Instead, punitive damages are awarded to punish the defendant for egregious conduct and to deter similar behavior in the future.

If you’ve been injured, an experienced personal injury lawyer can seek punitive damages on your behalf

Because punitive damages are awarded separately from the actual damages incurred in an incident, having an experienced injury attorney by your side is essential. They can help establish that the at-fault party was grossly negligent in their actions and provide the necessary evidence to support your case.

Punitive damages are influenced by various factors, and the rules governing them differ from state to state. With the guidance of a skilled attorney, you can navigate these complexities effectively and ensure that your claim for punitive damages is presented comprehensively and persuasively.

If you’ve been injured in Kentucky or Tennessee, contact us today at 800-800-4600 for a free consultation. Our team is available 24/7 to answer any questions you may have.