Compensatory vs. Punitive Damages: The Differences Explained

You’re working your everyday shift at the warehouse, and something comes loose. It’s that wire you’ve been telling them to fix for what seems like ages. It finally snapped.

You look around to see everyone is safe, but everyone else looks at you in horror. Your arm was almost severed.

After several surgeries, your arm is reattached but your functionality may never be the same. But you told them this would happen. Now it’s time to get compensated for your injuries.

You call up a lawyer and they tell you about compensatory and punitive damages, and you don’t know what those are. If you have suffered in a similar situation, here is a quick guide to compensatory vs punitive damages, what they are, and how they can help you.

What Are Compensatory Damages?

Compensatory damages are the cumulative name of things that need to be paid for that the accident caused and brought the plaintiff to court.

This often covers out-of-pocket costs that the plaintiff must pay. Some physical compensatory damages can include things like medical bills, compensation for lost wages, property damage, and lost earning capacity.

However, compensatory damages can include non-physical damage as well, such as emotional distress, post-traumatic stress because of the accident, and other debilitating mental stresses

There is no stipulation on what are and what are not compensatory damages, and law firms like the Sweet Lawyers can use this to their full advantage.

What Are Punitive Damages?

Unlike compensatory damages, punitive damages are designed to punish the defendant for, particularly gross misconduct. One of the most common ways to do this is through large settlement payouts.

The more money an individual or company loses to punitive damages, the less likely they are to commit the same offense in the future, as well as making sure others will stray from the idea of committing the same act in the future.

For this reason, punitive damages are often also called exemplary damages. Although the punitive damages deter the defendant from offending again, the plaintiff can receive a portion of the settled money.

The Differences Between the Two

Clearly, the difference is that one is toward the plaintiff and the other the defendant. Compensatory damages are essentially geared toward paying the plaintiff for their losses by the defendant.

Whereas punitive damages are like fines the defendant must pay to show that they won’t intentionally partake in this practice again, as well as deter anyone else from falling into the same trap.

The plaintiff can receive some or all of the punitive damage money if the jury or judge rules in their favor.