Property and Casualty Insurance Practice Exam

What are punitive damages intended to achieve?

1. To compensate the plaintiff

2. To punish the defendant and deter similar behavior

3. To encourage settlements

4. To cover legal fees

The correct answer is: To punish the defendant and deter similar behavior

Punitive damages are specifically designed to punish a defendant for particularly egregious or reckless behavior and to deter them and others from engaging in similar conduct in the future. This type of damage goes beyond simply compensating the plaintiff for their losses; rather, it serves a broader societal purpose by addressing harmful behaviors that undermine public safety or welfare. In cases where a defendant's actions are found to be willfully negligent or malicious, punitive damages highlight the seriousness of the conduct and signal to both the defendant and the public that such behavior will not be tolerated. This aspect distinguishes punitive damages from compensatory damages, which are aimed solely at making the harmed party whole. Compensatory damages (the first choice) focus on the actual losses suffered by the plaintiff, while punitive damages are more about societal interest in discouraging harmful actions. Encouraging settlements (the third choice) is typically related to methods that help parties come to an agreement before trial, and punitive measures do not play a role in that process. Covering legal fees (the fourth choice) is usually a separate issue and not a primary purpose of punitive damages. Therefore, the intention of punitive damages is clearly aligned with punishing and deterring future misconduct, making this option the most accurate in