Identify and explain the differences between various kinds of damages including compensatory and punitive damages and bad faith awards

What will be an ideal response?

Answer:
a. Compensatory damages are designed to compensate an insured for all of the actual losses or damages to make that person whole again. For example, if a person has not been able to pay his home mortgage or car payment because he did not receive a monthly disability check and, therefore, his home and car are repossessed, he may be able to recover equity for the home and car, attorney fees, and damages for emotional stress.
b. Punitive damages are often the larger of the two awards and are intended primarily to punish wrongdoing by the defendant and make an example of them to help deter such actions in the future. Unlike compensatory damages, punitive damages are not automatically recoverable if bad faith is found. In addition to bad faith, a plan member in California, for example, must prove the insurance plan to be the cause of fraud, oppression, or malice.
c. Bad Faith Awards
The dollar amount of a bad faith award is based on two concepts: (1) the degree of wrongfulness and (2) the wealth of the defendant. All lawsuits are expensive not only in the dollar cost of the damages, but in other costs as well. These costs remain even if the case is settled out of court. If the case is settled out of court, the plaintiff's attorney costs, miscellaneous costs, the attorney costs for the plan, and the benefit not originally paid must be paid. Additionally, substantial pain and suffering costs may be included. The value of the claim usually has no correlation to the amount of restitution (award) sought.