Punitive Damages

What Does Punitive Damages Mean?

Punitive damages are a form of compensation awarded to a plaintiff in a civil lawsuit in addition to actual damages. They are intended to punish the defendant for their wrongdoing and deter both the defendant and others from engaging in similar illegal behavior. For instance, a drunk driver who causes an accident may be required to cover the injured party’s medical expenses as well as pay punitive damages for their egregious misconduct.

Punitive damages are also referred to as exemplary damages.

Insuranceopedia Explains Punitive Damages

Many liability policies do not provide protection against punitive damages, as they typically only cover standard losses, such as the plaintiff’s medical expenses. This is one reason to think carefully about how much liability insurance you need, since a punitive damages award on top of a regular judgment can easily exceed your policy limits. However, additional coverage options are available. Alternatively, a more comprehensive and costly liability or umbrella policy may include coverage for punitive damages. A commercial umbrella insurance policy works similarly for businesses that face the risk of punitive damage claims.