Punitive Damages

When someone wins a lawsuit, he usually recovers monetary “damages” as his award. There are actually two kinds of money damages which may be recoverable under the proper circumstances: compensatory damages and punitive damages.

Compensatory damages (also called “actual” damages) are the amounts necessary to make the injured party whole, that is to compensate him for his loss.

A party recovers compensatory damages for the loss suffered when, for instance, the other party has breached a contract, injured him in an automobile accident or otherwise harmed him.

Another type of damages sometimes recoverable is “punitive” (sometimes called “exemplary”) damages. Punitive damages may be awarded together with compensatory damages when the conduct of the party at fault was particularly flagrant-more than merely a breach of contract or simple negligence.

Thus, when a person’s wrongful conduct also involves fraud, willful and wanton disregard of the rights and feelings of the other party or gross negligence, he may be liable for punitive damages along with compensatory damages.

As the term implies, punitive damages are awarded to punish the wrong-doer and set an example intended to deter him and others from similar conduct. Examples of situations warranting recovery of punitive dam ages are outright fraud, acts intended to cause serious harm to the other party, or where one’s degree of negligence is so gross that it borders on intentional misconduct.

The dollar amounts generally recoverable for punitive damages depend upon the degree of wrong involved. The courts usually require that punitive damage amounts be proportionate to the amount of compensatory damages awarded. Awards of punitive damages of five to ten times the amount of compensatory damages are common, although the amount VARY might be as little as one or two times the compensatory damages as well.

A recent Indiana Supreme Court case [FD. Borkholder Co., Inc. v. Sandock, 413 N.E. 2d 567 (Ind. 1980)] considered punitive damages in a construction situation. The case held that the contractor was liable for punitive damages when he failed to fill the holes in cinder block with concrete as required by the plans and specifications and shortened the roofline.

That contractor’s fault was found to have been more serious than simple breach of contract or simple negligence. That the contractor had omitted the mortar when he knew it was essential to the structural stability of the building resulted in culpability for which he was found liable for punitive damages.

The amount of punitive damages awarded in that case was $6,500; the compensatory damages having been $8,700. The court concluded that the contractor was guilty of fraud, misrepresentation, deceit and gross negligence.

There is a fine line between situations where punitive damages may be awarded. Persons and litigants should be aware of the risks and remedies possible in the punitive damage context.

Update Notes: In Colorado a statute enacted in 1986 provides that punitive damages can not exceed the amount of actual damages unless the trial judge finds the offender’s conduct to have been especially egregious and continuous. Sec60n 13-21-102, C.R.S. (1986 Cum. Supp.).

Also, punitive damages are not awardable in Colorado for breaches of contracts-except certain contracts, like insurance, where a special rela60nship exists between the parties or special circumstances are involved. Mortgage Finance, Inc. v. Podleski, 742 P.2d 900 (Colo. 1987).

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