Certified Information Systems Security Professional (CISSP) Practice Exam

Punitive damages are primarily designed to punish an individual or organization for particularly egregious misconduct and to deter similar behavior in the future. They go beyond mere compensation for losses suffered by the victim and are awarded to convey that the law does not tolerate certain actions, especially those that are malicious or grossly negligent. This aspect of punitive damages serves to send a clear message within society and among businesses that such behavior will result in significant financial penalties, promoting a standard of conduct that upholds ethical and legal norms.

Compensatory damages, which focus on reimbursing the victim for direct losses, differ significantly from punitive damages as they are not intended to punish or deter wrongdoing. Encouraging settlements outside of court relates more to civil procedure and negotiation tactics than to the punitive aspect of damages, while tax incentives do not play a role in the objectives of punitive damages. Overall, the goal of punitive damages is firmly rooted in the principles of punishment and deterrence, making this the correct choice.