Compensatory Damages vs Punitive Damages: Key Differences Explained

If someone is injured due to the negligence, carelessness, or willful wrongdoing of another, they may have grounds to pursue a personal injury lawsuit in Ontario.

One of the most important components of a successful claim is the monetary compensation awarded to the injured party. These payments, known legally as damages, come in different forms, the most common being compensatory damages, and the more exceptional, punitive damages.

Understanding the differences between these two types of damages can significantly impact your expectations during the legal process within the legal system and the outcome of your injury settlement. In this article, we’ll explore what compensatory and punitive damages are, how they differ, when each applies, and what factors Ontario courts consider when awarding them.

What Are Punitive Damages?

Punitive damages, or exemplary damages, are not delivered to the victim. Instead, they are disbursed to punish the defendant for conduct that is particularly harmful, malicious, oppressive, or high-handed.

Punitive damages are awarded in rare cases when the court thinks its disapproval of the defendant’s conduct and deter others from similar acts.

Unlike compensatory damages, which are determined in terms of the losses suffered by the victim, punitive damages are determined in terms of the defendant’s conduct and financial position.

The Role of Punitive Damages

Under Ontario Law, the threshold for awarding punitive damages is high, as punitive damages serve a specific purpose.

The Supreme Court of Canada has held that punitive damages should be awarded when:

• The conduct of the defendant is outrageous, malicious, or oppressive
• Compensatory damages are inadequate to deter
• There exists an interest on the part of the public to discourage such conduct

For example, in drunk driving, nursing home abuse, fraudulent business practices, or wanton injury personal injury cases, a court can hold out promise for granting punitive damages in addition to compensatory damages. But they are not available for all personal injury cases and must be specially argued and established solid evidence.

What Are Compensatory Damages?

Compensatory damages are awarded to an accident victim to pay them for the actual harm or loss they have suffered due to a wrongful action of another.

Compensatory damages are designed to “make the victim whole again”, i.e., to place them, as nearly as possible, back in the same financial and emotional state they were in when the accident occurred.

Compensatory damages are the financial compensation that is the most common form of damages in personal injury cases and civil actions overall. They can be granted in a very wide range of cases, including automobile accidents, slip and fall accidents, medical malpractice, product liability, and other types of tort actions.

Types of Compensatory Damages

Compensatory damages in Ontario are typically divided into two broad categories: special damages and general damages.

1) Special Damages (Pecuniary Losses)

Special damages comprise material monetary loss that is relatively easy to quantify. A few instances include:

• Medical expenses (hospitalization cost, rehabilitation, drugs)
• Loss of ability to earn in the future
• Directly incurred expenses such as going to see the doctor
• Damage to property.

Special damages are measured by receipts, invoices, pay stubs, and medical records. Your personal injury lawyer will play a key role in gathering and delivering this evidence to the insurance firm or court.

2) General Damages (Non-pecuniary Losses)

General damages compensate for intangible losses that have no measurable dollar amount.

They include:

• Pain and suffering
• Loss of enjoyment of life
• Loss of companionship
• Emotional distress

The calculation of general damages is more abstract and typically on the grounds of legal precedents, expert evidence, and the severity of the injury.

Such damages are the recognition of the mental and emotional impact an injury could have due to wrongful conduct. on an individual’s lifestyle.

Understanding the Differences Between Compensatory and Punitive Damages

Recognizing the difference between punitive and compensatory damages can assist victims of injuries in having realistic expectations when it comes to compensation and litigation.

Why the Distinction Matters for Injury Victims

If you have been injured in an accident, it is crucial to understand which types of damages may be available to you. While compensatory damages are likely to be the foundation of your claim, punitive damages can significantly increase your award, but only if specific criteria are met.

An experienced personal injury lawyer is able to assess your case and decide whether punitive damages need to be sought.

Our firm at Grillo Law has represented thousands of clients throughout Ontario and have secured them compensation in their claims, including those involving difficult cases where potential claims for punitive awards exist.

Eligibility for Both Compensatory and Punitive Damages

In Ontario, it is legally possible for an injured party to recover punitive as well as compensatory damages, but the case must meet different criteria.

To recover compensatory damages, the plaintiff must show that they suffered a loss or injury as a direct result of the defendant’s negligence or wrongdoing. This is true for most personal injury cases, such as car accidents, slip and fall, and medical malpractice.

For punitive damages, the plaintiff must go a step further by proving that the defendant acted maliciously, oppressively, or grossly negligently. Courts look for conduct beyond mere carelessness, such as purposeful wrongdoing or conscious disregard of the welfare of the public.

Some Examples Where Both Types of Damages Can Be Awarded Are:

• A drunk driver in a serious car accident, causing bodily harm and emotional distress
• A business knowingly manufacturing a faulty product which leads to consumer injuries.
• A nursing home deliberately abusing or mistreating residents.

In such cases, compensatory damages offer relief to the economic and emotional losses suffered by the victim, while punitive damages openly convey the message to the offender and society that such actions will not be tolerated under Ontario personal injury law.

How Compensatory Damages Are Calculated in Personal Injury Claims

Compensatory damages are computed in a multi-step manner where the magnitude the entire extent of an injured person is ascertained as his or her financial and non-financial losses.

Compensatory damages, as opposed to punitive damages, are paid on evidence and documentation.

Typical Factors That Are Given Consideration Wile Computing Compensatory Damages:

• Medical expenses: Past, current, and future medical care, therapy, medication, assistive equipment, and rehabilitation.
• Loss of Income: Determines lost wages due to the injury, including loss of earning capacity if the victim cannot return to his/her previous occupation or work full-time.
• Pain and Suffering: Non-financial loss typically is estimated from case illustrations and severity of injury (e.g., long term pain, scarring, emotional distress).
• Property Damage: Damages for personal property injured or destroyed in the accident.
• Cost of Future Care: Permanent disability and long-term injury are considered, in addition to the coast of caregiving, medical treatment, and adaptation of the home.

Your experienced personal injury lawyer will work together with medical personnel, financial specialists, and vocational specialists to ensure that all losses both present and future are properly documented in your claim.

Punitive Damages and Tax Implications

One especially significant issue for the injured victims and legal professionals alike is the taxing of punitive damages versus compensatory damages.

Compensatory damages in Canada are not taxable, as they are intended to reimburse a victim for the loss. Regardless of whether you are awarded medical bills, lost income, pain and suffering, or other applicable expenses, that type of compensation is typically not considered to be taxable income by the Canada Revenue Agency (CRA)

Turn to Personal Injury Lawyers at Grillo Law for Legal Assistance

If you require compensatory damages for a serious injury or believe that your case contains punitive elements, such as the other party’s negligence, the legal process may be difficult to manage and emotionally draining. Having an experienced and compassionate personal injury lawyer working for you is essential to protecting your rights and obtaining maximum compensation.

At Grillo Law, our legal team has over 40 years of experience representing accident victims across Ontario.