Nevada Personal Lines Insurance Practice Exam

The primary purpose of punitive damages is to punish and deter wrongdoers. Punitive damages go beyond the compensation of actual losses and aim to hold the defendant accountable for particularly egregious or malicious behavior. By imposing additional financial penalties, the law seeks to discourage similar conduct in the future not just by the defendant but by others in society as well. This serves a dual function: it punishes the offender for their actions and sends a societal message that such behavior will have serious consequences.

In contrast, compensation for financial relief to victims focuses on making the injured party whole for their losses, while encouraging settlements pertains to facilitating resolution of disputes without going to trial. Reimbursement of actual damages is concerned primarily with restoring the victim's financial situation prior to the harm, without any punitive aspect. Therefore, punitive damages specifically serve to address wrongful actions in a way that normal compensatory damages do not, highlighting their distinct role within the legal framework.