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Punitive damages are non-compensatory. A court awards them to further punish the party responsible for the injuries and losses of others. These losses are not limited to personal injury cases; they occur in fraud, malpractice, and product liability claims.

The Los Angeles personal injury attorneys at the Law Offices of Ramtin Sadighim believe it is important for injured parties to know their rights to plead for and receive punitive damages when they suffer injuries and losses due to the fault of others.

The focus of this article is to explain when and how punitive damages can be sought and awarded.

Punitive vs. Compensatory

There are distinct differences in these damage claims:

Punitive Damages

In California, punitive damages are not part of a settlement agreement, and a specific amount of punitive damages cannot be asked of the court. The injured party bears the burden of proof, the evidence must be convincing, and the intent of the responsible party must be clear. The court will determine the amount of punitive damages based on the evidence that supports the claim.

In its deliberations, the court will carefully consider the evidence, the responsible party’s financial position, intent, and the maliciousness of the acts. This comprehensive approach ensures a fair and just outcome.

Insurance policies do not cover punitive damages; the payment burden is solely upon the party responsible for the injury and loss.

However, the injured party receiving punitive damages must claim the award amount as “Other Income” to the IRS and the state’s Franchise Tax Board. The amount awarded by the court is taxed as ordinary income.

Compensatory Damages

Compensatory damages are awarded to make the injured party whole and to place the person in a position as though the loss did not occur. Expenses for medical treatment, therapy, and damaged property, along with lost wages and a diminished quality of life, are paid to the injured party. The injured party must specify current and future expenses and place a value on any non-economic losses (like pain and suffering).

Compensatory damages are negotiable and can be awarded in a settlement agreement to avoid court proceedings.

The basis of compensatory damages is negligence, where the acts of the responsible party were not intentional—like injuries suffered in a car accident. Insurance policies cover compensatory damages, and policyholders may be responsible for a portion of these damages through deductibles and coverage limits.

Generally, compensatory damages are not taxable as additional income by Federal or state taxing authorities. Compensation for a loss is not additional income.

The Requirements for Punitive Damages

Punitive damages can be sought only when the evidence is convincing and clear that the acts of the responsible party were intentional. The actions must be blatant, and the rights of others held in total disregard. Examples of intentional acts are:

  • driving under the influence,
  • unjust and cruel hardship, like denying an insurance claim, or
  • fraud and misrepresentation, like concealing a defect.

The Procedure for Punitive Damages

When punitive damages are sought, personal injury cases become more complex and technical. An experienced attorney will initially pursue a claim for compensatory damages.

Punitive damages can be sought in the same claim or requested later when the court finds in the injured party’s favor for compensatory damages. There cannot be an award for punitive damages without compensatory damages, even if the award is nominal.

The Calculation of Punitive Damages

There is no set formula for calculating these damages. Although California does not cap damages to punish a responsible party, Federal law prohibits excessive damage awards.

The Supreme Court defines “excessive” as 10x the compensatory award or an amount that would lead to financial ruin.

A typical punitive damage award in California is 2x-3x the amount awarded for compensatory damages.

Employers’ Liability for Punitive Damages

An employer can be liable for punitive damages against an employee only if it had a direct role in the intentional act. Examples would be an employer approving or encouraging the misconduct or knowingly hiring an employee not qualified for a position.

However, in compensatory damage claims, employers can be held liable for the negligent acts of employees without having a direct role or knowledge of the act. It would be as though the employer were the negligent party.

In cases of gross misconduct by C-suite executives, the company would be liable for both compensatory and punitive damages as though it were the negligent party who committed the intentional act.

Seeking Compensation? Contact an experienced Los Angeles Personal Injury Attorney Today

Punitive damages are awarded to an injured party where the acts of the responsible party are found to be blatant and egregious to disregard the safety and rights of others. Punitive damages can extend to employers and corporations in certain circumstances, but always without the protection and offset of an insurance policy.

These damages intend to punish the responsible party in addition to the losses suffered. The thought behind this type of damage is to set the responsible party as an example to deter future acts by the party and the public.

Insurance policies are in place to protect the holders against claims for actual damages caused to others, but not for punitive damages awarded to punish.

If you or a loved one were involved in a car accident and have suffered an injury or loss due to the actions of others, it is in your best interest to work with experienced and reputable Los Angeles car accident lawyer such as the professionals at the Law Offices of Ramtin Sadighim.

With our main office in Encino, we help injury victims throughout Los Angeles and California get the proper compensation they deserve. For further information and/or to schedule a Free consultation please contact the Law Offices of Ramtin Sadighim at 888.999.8744 or visit www.CaliAccidentAttorney.com to learn more.