What Is the Difference Between Compensatory Damages and Punitive Damages?

The legal system is so complicated that every personal injury lawyer spends at least seven years in higher education just to get their foot in the door. And even after all that work, most attorneys don’t step foot into a courtroom after additional time shadowing other lawyers.

If you are confused about how the legal system works, that’s completely understandable. You likely haven’t had decades to learn about it. Thankfully, you don’t need to spend that much time figuring out the law. You only need to ask the right questions of the right lawyers.

At Morgan & Morgan, our personal injury lawyers are happy to simplify complex topics like the difference between compensatory damages and punitive damages. If you have been injured by another party, you deserve to receive damages, and the better you understand the different types of damages, the better you can assist with your case.

The following information should answer all your basic questions. If you want more information after reading this, feel free to contact our law firm for a free case evaluation and consultation with an experienced attorney ready to help you.

Ask a Personal Injury Lawyer: The Difference Between Compensatory and Punitive Damages

The word “damages,” in legal jargon, refers to money a litigant is owed due to the actions of another. Thus, if someone wrecks your car, for example, you would be eligible to receive damages equal to the cost of repairing your vehicle.

That simple explanation misses a lot of the details, though. One of the more important details is that there are two types of damages: compensatory and punitive.

Compensatory damages represent expenses and losses that you suffered. These are measurable and provable damages. Returning to the previous example, your repair costs are compensatory damages, because you can produce a repair bill that proves exactly how much you spent to fix your car.

Punitive damages are more complicated. First, they only apply if the other party acted maliciously or recklessly. This means that they had to either intend to cause harm or know that their actions were likely to cause harm and do them anyway. Punitive damages are intended as punishment for acting in that manner.

Furthermore, punitive damages don’t reflect direct losses or expenses. Some states have formulas for calculating punitive damages, but they are not for recouping the money you lost. If you receive punitive damages, you will have more money than you did before you were harmed.

When you have been hurt by another party, your personal injury lawyer will attempt to collect the maximum possible compensatory and punitive damages for you.

Compensatory Damages

Many people equate compensatory damages to medical bills. And, while that isn’t completely correct, it makes a lot of sense. Medical bills usually make up the highest percentage of compensatory damages. And since you are receiving invoices almost as soon as you get medical attention, they are also some of the most visible expenses.

All too often, insurance companies will try to take advantage of this mistaken belief to underpay a claim. It will offer you enough money to pay for your first round of medical bills and then consider the claim closed. That can be devastating when other bills arise or additional rounds of medical expenses occur.

Before accepting any money from the insurance company, your personal injury lawyer will calculate your compensatory damages from all of the following sources as well.

Lost Wages

When an injury makes it impossible for you to work or limits the number of hours you can work each week, you are eligible to receive damages for any wages lost. This is easiest to calculate if you work the same hours every week. But even if you don’t, your attorney can estimate the amount of money you would have earned.

Furthermore, missing work can cause you to miss out on opportunities. For example, you might get a smaller raise or miss a promotion because you missed a few months of work due to injury. Compensation for those lost opportunities is also considered compensatory damages.

Future Medical Bills

One of the simplest tricks that insurance companies try to pull on claimants is offering them full compensation for all submitted medical bills and then closing the claim. That may be fine if you have fully recovered from your injury. But if you still need medical attention, you will be in trouble.

Many injuries require follow-up visits or ongoing treatment for months or years after the claim is resolved. Since you can’t provide the insurance company with a bill you haven’t yet received, these types of damages need to be estimated. If you have an accurate diagnosis, estimates can be surprisingly accurate, even for decades of treatment.

Transportation Expenses

If your injury limited your ability to move, you may not be able to drive a car or use public transportation. In a situation like this, you may need to rely on transportation services like ambulances or chartered cars. These aren’t cheap, and you shouldn’t be paying for them.

Similarly, if you were involved in a car accident, even if you can still drive, you may not have a working vehicle. The cost of a rental vehicle can be counted as compensatory damages.

Therapy

Arguably, therapy counts as a medical expense, but it is often treated differently. Physical therapy, occupational therapy, and psychiatric therapy are all ongoing forms of treatment that help you recover, but somewhat indirectly.

Regardless, if you need therapy to return to normal after an injury, you deserve to get compensation for it. This is one of the hardest expenses to calculate because therapy takes a different amount of time for each patient. Some people may recover in weeks, while others may take decades.

Other Expenses

This category of damages is one of the more difficult categories to identify but relatively easy to document. It can include a variety of expenses that most people don’t even realize they are paying for after an injury. 

Some examples include:

• Childcare
• Assistance services
• Extra shopping or food costs
• Lost wages of family members
• Costs of medical devices like crutches or a wheelchair

If your injury resulted in additional expenses for you or another person helping you, you can document those expenses and get reimbursed with compensatory damages. For example, if you have to pay for childcare services because you can no longer pick your kids up from school, those costs should be reimbursed.

You shouldn’t try to claim things that aren’t a result of your injury. But if any of your expenses increase because of the injury, inform your personal injury lawyer and document the expense as thoroughly as possible.

Punitive Damages

Just because the insurance company has paid for your medical bills, lost wages, and all other expenses, that doesn’t mean you never suffered from the injury. Even if you are financially in the black, you lost days, weeks, or even years of your life, and you were probably in pain for much of that.

In some circumstances, you can receive compensation for that pain and lost time. It can’t truly make up for your suffering, but it does help.

Whether you can receive punitive damages and how much you can receive will differ from state to state. In some states, they are extremely difficult to qualify for, and there are strict limits on how much money you can get. Other states have hardly any restrictions.

Typically, the worse you are harmed and the more egregious the behavior of the other party, the more money you can receive. Some awards are in the tens of millions of dollars, though hopefully, you will never be injured badly enough to require that high of an award.

Your personal injury lawyer from Morgan and Morgan will try to determine whether you are eligible for punitive damages during your free case evaluation. If you are, or it seems likely, they will investigate your case to find evidence of malice or recklessness.

Even when punitive damages are involved, typically the responsible party is covered by insurance that pays the cost. Because insurance companies are usually on the hook for these expenses, many punitive damages are negotiated as part of an overall settlement that also includes compensatory damages.

Punitive damages represent the biggest gamble in any personal injury case. The maximum possible award at trial is usually quite a bit more than you would receive from a settlement. 

But that requires you to take the case to trial, and there’s no guarantee that the jury will side with you or give you a massive award. Accepting a smaller settlement may be the better choice.