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Exemplary, or punitive damages, serve a critical function in the legal system by aiming to punish the wrongdoer for particularly harmful or egregious conduct. Unlike compensatory damages, which are intended to reimburse the injured party for specific losses such as medical expenses or lost wages, punitive damages go beyond mere compensation. They are imposed when the defendant's behavior is deemed to be not only negligent but also willful, malicious, or fraudulent.

The underlying purpose of these damages is to deter both the defendant and others in society from engaging in similar behavior that could cause harm. By imposing a financial penalty that is significant enough to serve as a warning, the legal system seeks to influence future actions and promote adherence to lawful and ethical conduct. This deterrent effect is crucial in maintaining accountability and encouraging safe practices, especially in fields like health care where risks can significantly impact patients and the broader community.

In contrast to punitive damages, compensation for medical expenses or legal fees is aimed at making the injured party whole, which is not the primary function of exemplary damages.