When it comes to legal battles, not all damages are created equal. In this article, we’ll break down the differences between punitive damages vs. compensatory damages — two terms that may sound like lawyer lingo but are actually pretty simple to understand. This guide can be used by plaintiffs or defendants in civil cases, who want to know about the differences between these two types of damages.
What are punitive damages?
Punitive damages are one of the many kinds of non-compensatory damages in Canada, along with aggravated and nominal damages. Also called exemplary damages, these are awarded to punish the erring person and prevent similar conduct from the same person or other persons or entities in the future.
As to how they're awarded, Lisa Wagner, one of the partners at Wagners, gave some insights.
“Punitive damages are awarded in cases where there has been egregious conduct on behalf of the Defendant that goes beyond negligent acts or omissions,” she says. “The legal system awards punitive damages in cases in order to penalize defendants for their behavior, which caused a plaintiff injury.”
In other words, punitive damages are awarded based on the court's discretion, and only in exceptional cases, just like the other types of non-compensatory damages. The court determines if the defendant acted in a malicious, grossly negligent, or arrogant manner.
“These damages also serve as a deterrent against similar acts or omissions from occurring in the future,” Wagner adds. “It is a monetary award that looks at the defendant's conduct, not the plaintiff’s losses.”
Here’s more of a general video that talks about punitive damages, and how it compares to other types of damages that plaintiffs can claim in a civil case:
To learn more about punitive damages, and whether you can claim one in your case, ask one of the best personal injury lawyers in Canada as ranked by Lexpert.
What are compensatory damages?
“Compensatory damages are awarded in order to put a plaintiff back in the position he or she would have been in had the negligent act or omission not occurred,” Wagner explains.
This type of damages is made up of two types of damages, namely:
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Special damages: Also called actual damages. This is compensation for the tangible, monetary, or quantifiable loss of the plaintiff because of the wrong or negligence by the defendant (e.g. in a breach of a commercial contract. It may be financial losses suffered by one of the parties to the contract after the breach). “They are easier to calculate,” Wagner says. These include medical bills, lost wages, or the cost of replacing damaged property.
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General damages: Also called the non-pecuniary damages, these are the compensation awarded to the plaintiff for their mental and emotional distress or for the non-financial aspect of their loss (e.g. in a wrongful death case) that family members can claim for their mental suffering over the loss of their loved one). Wagner says that these damages are “a bit more challenging to calculate and include an award for pain and suffering experienced after an injury.”
These two components come from the rationale that an injured person suffers not only physically, but also emotionally. Hardly can we see cases where plaintiffs only claim special damages, without any general damages, or the other way around.
Compensatory damages are also commonly called actual damages, because a plaintiff can only claim compensation for the actual losses that they can prove. Plaintiffs would also have to calculate them, before asking the court for its award.
To put it into context, here’s how compensatory damages work in the context of car crashes:
If you want to claim compensation for your personal injuries, whatever kind it may be, consult the Lexpert-ranked best personal injury law firms in Canada.
Punitive damages vs. compensatory damages
“Both punitive and compensatory damages are monetary awards,” Wagner says. “Punitive damages are not common in negligence cases. It looks to the egregious conduct of the defendant which goes beyond negligence.
“Compensatory damages, on the other hand, assesses what the plaintiff has lost because of a negligent act or omission, and attempts to make the plaintiff whole again.”
While both damages may be awarded to you, this doesn't happen all the time. At most, compensatory damages may only be awarded, without any non-compensatory ones, including punitive damages.
Regardless, it’s important to know the differences and similarities between the two. This is to prepare you for any civil case or claim for damages that you would like to file. Below, we’ll discuss some of these differences and similarities; for a more detailed explanation, please consult a professional, such as a personal injury lawyer.
Differences: punitive vs. compensatory
Here are the most common differences between punitive damages and compensatory damages:
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|
Punitive damages |
Compensatory damages |
|---|---|---|
|
Purpose |
not meant to compensate the victim; it is to punish the defendant for their acts and to prevent similar shocking acts in the future |
meant to compensate the victim, and to make them ‘whole’ again in the perspective of the law, whether for their pecuniary or non-pecuniary loss |
|
Nature |
along with other non-compensatory damages, punitive damages are awarded secondarily or just adjunct to the award of compensatory damages |
claims for compensatory damages, especially for special damages, are the main cause of action by a plaintiff against the other party |
|
Basis |
based on defendant’s acts (e.g. if the defendant acted maliciously or caused intentional harm) or based on the effect to the plaintiff (e.g. if plaintiff was seriously injured) |
special and general damages are based on the proof of loss to be presented by the plaintiff, along with its supporting pieces of evidence (e.g. medical bills, financial statements) |
|
Amount |
courts award punitive damages based on its proportionality with the outrageous misconduct of the defendant, and considering its effects to the plaintiff |
special damages must be substantiated using proof of losses; general damages are capped by common law, and its final amount depends on the court |
|
How often it’s awarded |
punitive damages are rarely awarded by courts, since they are very much the exception, rather than the general rule |
as the standard award, both special and general damages are ordinarily awarded, since it is usually the main claim of the plaintiff in a lawsuit |
|
Common uses |
if the case calls for it, punitive damages are usually awarded in intentional torts, fraud, and defamation cases |
compensatory damages are awarded in a wide range of civil cases, but most specially in cases of personal injury and breach of contract |
In any case, plaintiffs must first consult a lawyer to know what types of damages they can claim for their case. Defendants must also have their own counsel, who are knowledgeable on how to argue against a claim for damages, whether it’s punitive or compensatory.
Similarities: punitive vs. compensatory
Still, there are similarities between punitive damages and compensatory damages. Although these are hardly seen, since the law has made it clear that these two types of damages serve different purposes and apply in various scenarios.
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Applies to torts cases: Whether it be for personal injuries, contract disputes, employment issues, property damage, or defamation lawsuits, both punitive and compensatory damages may be awarded. What’s important is that the legal grounds for the award are met, and that the court gives appropriate reasons for these damages. As such, compensatory and non-compensatory damages may all be awarded in one case, as long as they're justified and backed up by law and logic.
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On necessity to be pleaded: Both compensatory and punitive must be asked for by the plaintiff before it can be awarded by the court depending on the case. They must also be proved by evidence, even if their grant is dependent on the wisdom of the jury or the court.
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Guided by common law: There can be different methods of calculating how much punitive or compensatory damages should be awarded to a plaintiff. However, courts are still guided by common law and precedents when making so. In exceptional cases, the courts may go beyond these set limitations of amount. For both, they’re all dependent on judicial discretion, while acknowledging the limits set by the law.
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Common ground for award: At the very least, there must be a finding of wrongful conduct on the part of the defendant for the award of either or both punitive and compensatory damages. As one of the basic elements of torts, the plaintiff must prove that a wrong was committed, and that it was the cause of their injuries. Although an award of punitive damages stands on a different plane as compared to compensatory ones.
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Damages can be appealed: Both punitive and compensatory damages can be appealed by either party. They may disagree with the specific amount of award adjudged by the court, the reasoning behind the award, or the law on which it was based upon. To add, common law provides that the appellate court have the “greater scope and discretion when reviewing jury awards of punitive damages than an ordinary award of damages.” (Hill v. Church of Scientology of Toronto, [1995] 2 S.C.R. 1130)
Again, there’s no better action than to directly talk to a lawyer as to what damages would apply to your case. Each case is unique, and it’s very hard to generalize these damages to be appropriate for a given claim.
Example of punitive and compensatory damages
The case of Whiten v. Pilot Insurance Co., 2002 SCC 18 is an example of where both punitive and compensatory damages were awarded to the plaintiff. This case is also a leading Supreme Court case for punitive damages, which is instructive on how punitive damages should be awarded by the courts.
In this case, Daphne Whiten and her family were victims of a fire that ravaged their home. As a result, they were in a dire financial situation and were forced to rent a nearby cottage.
While the house was insured with Pilot Insurance Company, the defendant in this case, the insurer made a measly payment to Whiten. The insurer also cut off the rental payments that it made for the family. All of these are based on the insurer’s allegation that “the family had torched [their] own home.”
The Supreme Court’s decision
In awarding punitive damages, the Supreme Court held that the conduct of Pilot Insurance Company in denying Whiten’s claim was “exceptionally reprehensible.” The Court then considered the following factors:
- Pilot Insurance’s very own expert investigator, initial expert, and the local fire chief all said that there was no evidence of arson in this case
- the conduct of Pilot Insurance “was planned and deliberate and continued for over two years,” while Whiten’s financial situation “grew increasingly desperate”
- the jury was convinced that Pilot Insurance knew, in the very first place, that its defense of arson was “contrived and unsustainable”
These subjected Whiten to the mercy of Pilot Insurance, as she was forced to settle for less than what she is entitled to under her insurance policy.
On appeal, the Court of Appeal reduced the original punitive damages to $100,000. In the end, however, the following award by the jury were upheld by the Supreme Court:
- punitive damages: $1 million
- compensatory damages: $318,252.32
Key differences of punitive damages vs. compensatory damages
While punitive damages and compensatory damages serve distinct purposes in Canadian law, both play crucial roles in ensuring justice and fairness for all. Where punitive damages are awarded to punish the defendant’s outrageous conduct and deter any future similar wrongdoing, the purpose of compensatory damages is to make the plaintiff ‘whole’ once again after the injury.
It is important for plaintiffs and defendants to understand the differences and similarities between these two types of damages. Whether they’re seeking compensation for personal injury or defending against a lawsuit, it’s always best to consult a skilled legal professional to ensure that the claim for these damages is handled appropriately.
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