It seems that you regularly hear about lawsuits that result in huge awards. At one point, a lawsuit against Exxon Mobil resulted in $5 billion in punitive damages — although on appeal that amount was deemed excessive.

Punitive damages that make the news are usually quite large, into the millions of dollars. But what are these punitive damages? How are they decided? And are they different from other types of damages that can be awarded during a lawsuit?

Here are some of the basics of punitive damages:

 Compensatory Damages vs. Punitive Damages

First of all, it’s important to understand the difference between compensatory damages and punitive damages. Just as the name implies, compensatory damages are those that are awarded as a way to compensate, or repay, the injured person for the losses suffered as a result of the injury.

If someone is discovered to be at fault for your injury, he or she is required to compensate you for the damage. This usually means that your medical bills are covered, and that the other person (or his or her insurance company) is required to pay for any therapy that you might need to restore you, as nearly as possible, to your state before the injury.

Compensatory damages also include lost wages, if your injury resulted in missed work, and repayment for damaged property and other costs that result from the incident. A good personal injury lawyer can help you understand what to expect in terms of compensatory damages.

There are some cases, though, in which the person at fault is thought to have acted in a manner that was very negligent or reckless. In these cases, a judge or a jury might feel that merely restoring you with the help of compensatory damages is inadequate. There might be a feeling that the person who injured you needs to be punished. This is where punitive damages come in. These are damages that are awarded to you not because you “deserve” the money, but because it is thought that the person that injured you needs to be punished further.

 Why Are Punitive Damages Awarded?

Punitive damages are not allowed in all cases, and there are some states that allow them, but that cap the award amount, depending on the situation and injury. It’s important that you speak with a personal injury attorney so that you understand the policies and rules regarding punitive damages in your state.

These damages are usually awarded as a way to punish the person that caused the injury. He or she might not face criminal charges, so punishing him or her financially might be the only way that the judge or jury feels that justice can be served.

Another reason for punitive damages — especially large amounts — is to set an example and to deter others from engaging in similar behavior. In many cases, a huge award is meant to let others know that engaging in such behavior and injuring others will be very costly, and they are better off not to try it. This is a method used particularly in cases that involve corporations. The hope is that punitive damages can scare others into behaving appropriately.

 Will You Receive Punitive Damages?

Every case is different, so there is no guarantee that you will receive punitive damages on top of your compensatory damages. In order to have a chance at punitive damages, you have to be willing to see a lawsuit through to the finish — and this might include appeals. One court might allow the damages, but on appeal another might reduce the damages or eliminate them altogether.

Before you decide to pursue a lawsuit in the hope of receiving punitive damages, it’s a good idea to consult with your attorney. He or she can give you an idea of what to expect, and help you decide whether to just accept a settlement instead.