Punitive damages are greatly misunderstood. The so-called "tort reform" movement is a campaign of misinformation designed to confuse the public about one of the most effective deterrent tools of the civil justice system. Funded by companies that engage in fraud and deceptive practices - or corporations that show callous disregard for the safety of people who use defective products they sell - groups who call themselves "tort reformers" have fought the civil remedy of punitive damages for years. Starting a few decades ago, these companies and their trade groups poured money into a campaign to convince juries, Congress, and the consumer public that punitive damages were the product of rogue juries, certain courts and a handful of trial lawyers.
Not true. Punitive damages serve to prevent and deter egregious behavior that harms people, often lots of people.
Ron Burdge, an excellent consumer advocate and trial lawyer in Ohio, has posted the best metaphor I have seen to describe why we have the remedy of punitive damages for fraud and deceptive conduct. He tells it so well, a summary won't do. It reads like a parable. You can click here to read the full story, and remember Young Chuck and the Texas farmer before setting foot on any car dealer's lot.
Many people have tried to explain why that extra penalty is necessary to stop the bad acts from continuing. The free market system we live in is a kind of legal honor system, and that system fails to function if bad actors are willing to break the law - consumer laws - over and over again until they get caught. Sometimes a good, short parable - like a good picture - is worth a thousand colorful words.