What is the key difference between compensatory and punitive damages?

The distinction between compensatory and punitive damages is critical in legal contexts. Compensatory damages are designed specifically to reimburse a plaintiff for actual losses suffered, such as medical expenses, lost wages, and pain and suffering resulting from the defendant's actions. Their primary purpose is to make the injured party whole again, addressing the financial impact of the loss or injury.

On the other hand, punitive damages are awarded not to compensate the victim but to punish the defendant for particularly egregious or reckless behavior and to deter similar conduct in the future. These damages are typically awarded in cases where the defendant’s actions are found to be malicious, fraudulent, or grossly negligent. The focus here is on the behavior of the defendant rather than on losses incurred by the plaintiff.

Thus, the correct response emphasizes that punitive damages are intended to serve a punitive function, while compensatory damages focus on recovery for losses. Understanding this difference is essential for accurately interpreting legal rulings and the type of damages that may be awarded in a lawsuit.