What Are Punitive Damages?

The question plaintiffs almost always ask their personal injury attorney after “Do I have a case?” is “How much can I get?” In a personal injury case, the amount of damages available depends on the victim’s injuries and degree of suffering. In other civil cases, the damages depend on the nature of the case.

Compensatory damages “make the victim whole.” After a car accident, for example, victims can request economic damages, such as medical bills and lost wages, and non-economic damages, such as pain and suffering and emotional trauma. States usually do not limit, or “cap,” the amount of compensatory damages. Victims can receive the full amount of economic damages, although some states limit the non-economic damage awards.

Courts award punitive damages, also called “exemplary damages,” in cases where the defendant’s conduct was unusually negligent, reckless, or intentionally harmful. Punitive damages do not compensate the victim for their injuries.

The purpose of punitive damages is to punish the defendant and discourage similar behavior in the future. However, there are limits on how much a court may award in punitive damages.

When Are Punitive Damages Considered?

Courts award punitive damages very rarely. Some kinds of civil cases cannot receive punitive damages, and plaintiffs must request them in court. Punitive damages are not part of insurance claims or other settlements. However, the threat of a large punitive award at trial is a powerful negotiating tool that can significantly increase the overall settlement amount.

Contract Law

Courts usually will not award punitive damages in a breach of contract case. In these cases, the contract itself may provide for additional damages if one party intentionally breaches.

In these cases, the courts usually intervene only if the defendant acted in a way that went beyond the scope of the contract, such as fraud or bad faith.

Product Liability

Product liability involves any item placed into the “stream of commerce.” Any entity involved in the manufacture, production, shipment, or sale of a product can be liable if that product harms a consumer. Product liability falls into three main categories:

• Design flaws: The product’s design means it is unsafe, no matter what the manufacturer does. Gas tanks designed without leak-proof bladders are a type of design flaw.

• Manufacturing defects: The product itself is safe, but a batch came out of the plant with a fatal error. Produce recalls for E. coli are a type of manufacturing defect.

• Marketing defects: Also called “failure to warn” defects, cover everything from improper warning labels to fraudulent advertising. Dangerous drugs that lack adequate warning of side effects fall into this category.

In any of these categories, punitive damages may be awarded if the plaintiff proves the company knew about the product’s danger but consciously disregarded the risk to public safety.

Tort Law

Torts are other civil cases, such as personal injury, defamation, and property law. Punitive damages awards in these cases require clear and convincing evidence that the defendant acted in a manner that warrants such an award.

Depending on state law, courts award punitive damages during the damages phase of the trial. The trier of fact (the judge or jury) must first determine if the defendant is liable for the plaintiff’s injuries and the value of the actual damages in the case.

In most states, the plaintiff must specifically request punitive damages and include justification in the complaint.

For instance, in California, a plaintiff’s complaint must contain:

• A statement saying they are asking for punitive damages under California Civil Code Section 3294

• Specific facts showing the defendant acted with “malice, oppression, or fraud”

However, the complaint cannot contain an amount of punitive damages. The plaintiff must serve the defendant with a separate Statement of Damages and a Reservation of Right to Punitive Damages after filing the complaint. The defendant has the right to bifurcate or separate the damages portion of the trial from the fact-finding portion.

When Do Plaintiffs Win Punitive Damages?

Plaintiffs receive punitive damages in about 5% of all cases. The standard of proof is very high, and the defendant must have acted with more than ordinary negligence or carelessness.

In some states, gross negligence or reckless disregard for human life is not sufficient. The defendant must act with malice, fraud, or an intentional disregard for the safety of others beyond simple negligence.

The McDonald’s Coffee Case

One of the best examples of why and how punitive damages get awarded is the famous but often misunderstood case of Liebeck v. McDonald’s Restaurants.

In 1992, Stella Liebeck suffered second- and third-degree burns on her thighs and genitals when hot coffee from a local McDonald’s drive-through spilled on her legs. After eight days and some painful surgery to repair the damage, Liebeck asked McDonald’s for $20,000 to help pay for expenses. The corporation refused, and Liebeck sued.

During discovery, Liebeck’s attorneys found that during the previous ten years, McDonald’s had received more than 700 complaints and similar cases regarding the temperature of their coffee. The company kept its coffee at 180 degrees, well over what experts and McDonald’s own attorneys agreed was safe. McDonald’s admitted it did not warn consumers that the coffee was unsafe. The company said that despite the lawsuits, they had no plans to lower the temperature of the beverage.

Because of these facts, the trial court found that McDonald’s behavior met the threshold for “intentional disregard for the safety of others.” The corporation was well aware of the risks and that others were being harmed, yet chose to do nothing. The trial jury awarded Liebeck $2.7 million in punitive damages, about twice what the corporation nets in coffee sales per day.

The trial judge reduced the punitive award to $480,000, and the parties ultimately settled for a confidential amount before the case was decided on appeal.

Factors in Awarding Punitive Damages

The McDonald’s coffee case is a powerful example of the kind of situation that can lead to punitive damages. To determine if such an award is justified, courts and juries look for specific types of wrongdoing. The facts from the Liebeck case help illustrate what they look for:

• Was the conduct more than a simple mistake? Punitive damages are reserved for conduct that is reckless, malicious, or shows a deliberate indifference to the safety of others. For example, McDonald’s had had ten years’ worth of evidence that their coffee was too hot and was causing injuries. They acknowledged that they could have provided warnings and did not. Liebeck requested a nominal sum to partially offset her damages, and they refused.

• Would a financial penalty deter future misconduct? The purpose of punitive damages is to punish the defendant and prevent them—and others—from acting the same way again. The defendant’s financial situation is a key factor here. In the Liebeck case, the jury’s initial award of $2.7 million was intentionally tied to the company’s profits, representing about two days of McDonald’s coffee sales. The jury’s goal was to set a figure high enough to get the corporation’s attention and force a change, rather than a small amount it could write off as a minor business expense.

• Is the award proportional to the harm caused? After a jury decides on an amount, judges review it to ensure it is not “grossly excessive” compared to the victim’s actual harm and the defendant’s conduct. The judge in the McDonald’s case ultimately reviewed the jury’s large award. He decided to reduce the amount, finding that a lower figure was still enough to punish McDonald’s while being more reasonably related to Ms. Liebeck’s actual injuries. This judicial review is a common check and balance in the legal process.

Large punitive damages awards are often challenged on appeal, where judges review them to ensure they are not excessive and comply with constitutional due process limits. This review can sometimes result in the award being reduced.

Ask a Professional About Punitive Damages

Although punitive damages are rarely awarded in civil cases, potential plaintiffs should ask their attorneys if they can get such damages. A personal injury lawyer in your state can let you know if your claim warrants requesting punitive damages.

If you’ve sustained injuries or financial damage due to someone else’s conduct, talk to a personal injury attorney about your options. Going to court may not be the answer in every case, but it’s important to know your rights and the different avenues you can take to get compensation.

FindLaw’s directory of personal injury attorneys can help you get started. There, you can find licensed professionals in your state with experience working on cases like yours.