What are Punitive Damages?

Punitive Damages vs Exemplary Damages

Punitive damages a/k/a exemplary damages are damages awarded in a civil trial as a way to punish a defendant for gross negligence or severe misconduct. Although the purpose behind punitive damages is not to compensate the plaintiff, they are paid to the plaintiff in court, making their financial recovery significantly smoother. In Texas, punitive damages are defined and regulated by Chapter 41 of the Texas Civil Practice and Remedies Code:

(5)  “Exemplary damages” means any damages awarded as a penalty or by way of punishment but not for compensatory purposes. Exemplary damages are neither economic nor noneconomic damages. “Exemplary damages” includes punitive damages.

The name “punitive damages” comes straight out of the definition of “exemplary damages.” As a result, they are used interchangeably to describe the same thing.

Factors that are Considered by Jurors

Under the Due Process Clause of the Fourteenth Amendment, the imposition of excessive punitive damages is strictly prohibited. Because the main purpose of punitive damages is to punish the wrongdoing of the defendant, rather than compensate the plaintiff, state and federal courts have implemented guidelines to ensure damages are reasonable and fair.

In 2003, the United States Supreme Court ruled in State Farm Mutual Automobile Ins. Co. v. Campbell, 123 S. Ct. 1513 that the punitive damages awarded were excessive and therefore in violation of the Due Process Clause. In this case, the Court applied three guideposts that had been established in prior case law:

  1. The degree of reprehensibility of the defendant’s misconduct;
  2. The disparity between the actual or potential harm suffered by the plaintiff and the punitive damages award; and
  3. The difference between the punitive damages awarded by the jury and the civil penalties authorized or imposed in comparable cases.

The Supreme Court did establish guidelines related to the second guidepost to help clarify the permissibility of the ratio between actual and punitive damages. The Court held that the degree of punishment must be reasonable and proportionate to the amount of harm the plaintiff suffered and the damages recovered. While punitive damages are constitutional, in this case the Supreme Court applied guidelines to ensure they are not abused.

Burden of Proof for Punitive Damages

The burden of proof for punitive damages falls upon the plaintiff. This is because the plaintiff is seeking punitive damages not simply because were injured, but because the actions of the defendant were egregious. In this case, the plaintiff is seeking an award of a specific amount that is to be decided by the jury. There are many punitive damages statutes that alter the existing common law.

In Texas, the burden of proof for punitive damages is higher than the burden of proof for ordinary negligence damages. Punitive damages must be proven by “clear and convincing evidence” not the normal “preponderance of the evidence” standard for negligence. Furthermore, for a jury to award punitive damages, the verdict must be unanimous rather than the 10/12 jurors required for negligence.

No Punitive Damages Without Proof of Actual Damages

Additionally, in order to receive punitive damages in Texas the plaintiff must prove actual damages. Actual damages, also known as compensatory damages, are awarded based on proven injuries suffered by the plaintiff such as medical bills and lost wages.

Fraud, Malice or Gross Negligence Required for Exemplary Damages

In order to recover exemplary damages in Texas, the plaintiff must show that the harm resulted from fraud, malice or gross negligence.  Gross negligence means an act or omission:

  1. which when viewed objectively from the standpoint of the actor at the time of its occurrence involves an extreme degree of risk, considering the probability and magnitude of the potential harm to others;  and:
  2. of which the actor has actual, subjective awareness of the risk involved, but nevertheless proceeds with conscious indifference to the rights, safety, or welfare of others.

Thus, a merely negligent action will not rise to the level of an award of punitive damages. Furthermore, you cannot obtain punitive damages in Texas for violations of the Texas Deceptive Trade Practices Act, violations of the Texas Insurance Code, Antitrust Code violations or criminal Medicare Fraud.