How do punitive damages differ from compensatory damages?

In the context of tort law, compensatory and punitive damages serve distinct purposes regarding the resolution of civil disputes.

Compensatory damages are designed to make an injured party whole by providing money to cover actual losses or injuries sustained as a natural and proximate result of a wrongful act. These awards aim to place the victim in the position they would have occupied had the injury not occurred, covering items such as medical expenses, lost wages, and compensation for pain and suffering.12

Punitive damages, also known as exemplary damages, serve a different function: they are intended to punish the defendant and express society’s moral disapproval of particularly reckless, malicious, or oppressive conduct. Unlike compensatory damages, which focus on the victim's loss, punitive damages are awarded in extreme circumstances to make an example of the wrongdoer.213

Key differences include:
* Purpose: Compensatory damages provide restitution for harm; punitive damages act as a sanction or deterrent.21
* Payment: Compensatory damages may often be covered by insurance, whereas punitive damages typically must be paid directly by the defendant.2
* Calculation: Punitive damages are often tailored to the amount of compensatory damages awarded and the defendant's wealth, rather than the specific cost of the victim's injury.23