'Damages' means the monetary compensation awarded to a person, who suffers losses due to the fault or negligence of the wrong-doer. In general, damages can be classified into two types - compensatory and punitive.
Compensatory damages are paid to compensate for the loss, injury, or harm caused to the aggrieved party or plaintiff, by the negligence or intentional action of the defendant. There are two types of compensatory damages - special and general.
Special damages are paid for the direct or indirect monetary losses suffered by the plaintiff, whereas, general damages deals with non monetary losses, like pain and suffering. One example for non monetary loss is defamation, which harms the reputation of a person.
On the other part, punitive damages are paid to the aggrieved party, when compensatory damages are deemed to be inadequate, and the defendant's action is found to be malicious and intentional.
Punitive damages refer to that monetary compensation, which is awarded to the aggrieved party, in excess of the actual damages suffered by him. This type of compensation is awarded in some special cases, where the court wants to deter the defendant and others from engaging in actions, like the one that caused the suit.
It is like a punishment for the defendant, so as to refrain him from similar future actions. This applies to such cases, where the jury finds that the action of the defendant was malicious, intentional, and uncivilized. Punitive damages are otherwise known as exemplary damages.
Punitive damages is defined as the special and highly exceptional damages ordered by a court against a defendant, where the act or omission which caused the suit, was of a particularly heinous, malicious, or high-handed nature.
In short, punitive damages are awarded to punish the defendant for the outrageous and intentional misconduct and to deter him from such actions in future. In this type of compensation, the plaintiff will receive it in whole or in part. As it is an amount paid in excess of the normal compensation, this type of damages are awarded in special cases only.
One of the most important factors regarding this type of monetary compensation is that it is not applicable in contracts, but can be applied in case of an independent tort, that is committed in a contractual setting. Punitive damages are also not covered by most of the insurance companies.
In short, punitive damages is a method of punishing the defendant in a civil suit, and the concept was developed to uphold the interests of those people, who are harmed by others. This concept was recognized for the first time during the latter part of the eighteenth century. By the mid-nineteenth century, the concept got transformed to a part of civil law.
At present, the law relating to punitive damages may vary from one state to another. In some states, unless otherwise required by the statute, it is the discretion of the jury to award this type of damages, as per the facts of individual cases.
While some states do not acknowledge the law of punitive damages in any action, some others have set definite guidelines for awarding the same. However, the concept of punitive damages is a controversial subject, which is said to attribute an arbitrary and excessive power on part of the civil justice system.