# Exemplary damages

> Exemplary damages is Texas's term for punitive damages. They are awarded only for fraud, malice or gross negligence, and capped by statute. How it works.

Canonical page: https://accidentclaimfacts.com/glossary/exemplary-damages/  
Last reviewed: October 29, 2026 by the Accident Claim Facts editorial team  
General information, not legal advice. Talk to a licensed attorney in your state.

## Quick answer

Exemplary damages is the term Texas law uses for punitive damages: money awarded to punish a defendant and deter similar conduct, not to repay a loss. In Texas they are allowed only for fraud, malice or gross negligence, and the amount is capped by statute.

## In a car accident claim

Most crash claims involve ordinary carelessness, so exemplary damages are rare. To get them, a claimant must prove clear and convincing evidence that the harm resulted from fraud, malice or gross negligence. That is a higher bar than the usual civil standard.

The cap is the greater of two times economic damages plus up to $750,000 of non-economic damages, or $200,000. The cap does not apply in some criminal cases, including intoxication assault and intoxication manslaughter, which can matter in [drunk driver accidents](https://accidentclaimfacts.com/accidents/drunk-driver-accidents/). In a wrongful death case, Texas allows them when the death is caused by the wilful act or omission or gross negligence of the defendant. Our [Texas guide](https://accidentclaimfacts.com/location/texas/) covers the state's other rules, and [types of damages](https://accidentclaimfacts.com/money/types-of-damages/) explains how punitive damages differ from compensation.

## Example

> **Example:** A driver who is heavily intoxicated crashes into a family's car on a Texas highway. Besides compensation for their injuries, the family asks the jury for exemplary damages, arguing gross negligence. Because the standard is clear and convincing evidence, they present the driver's blood alcohol test and witness accounts.

## Related terms

- [Punitive damages](https://accidentclaimfacts.com/glossary/punitive-damages/)
- [Gross negligence](https://accidentclaimfacts.com/glossary/gross-negligence/)
- [Blood alcohol concentration](https://accidentclaimfacts.com/glossary/blood-alcohol-concentration/)
- [Damages](https://accidentclaimfacts.com/glossary/damages/)

## FAQ

### Are exemplary damages the same as punitive damages?

Yes. Texas law uses "exemplary damages" for what most other states call punitive damages. Both are meant to punish serious misconduct rather than to repay a loss.

### Are exemplary damages taxable?

Generally yes. According to the IRS, punitive damages are taxable, even when they are part of a settlement for a physical injury. Many people ask a tax professional how this applies to their settlement or award.

## Sources

- [Texas Legislature, Civil Practice and Remedies Code chapter 41](https://statutes.capitol.texas.gov/Docs/CP/htm/CP.41.htm) — exemplary damages standard, cap and exceptions
- [Texas Legislature, Civil Practice and Remedies Code chapter 71](https://statutes.capitol.texas.gov/Docs/CP/htm/CP.71.htm) — exemplary damages in wrongful death cases
- [IRS, Publication 4345, Settlements—Taxability](https://www.irs.gov/pub/irs-pdf/p4345.pdf) — punitive damages are taxable
- [Texas Legislature, Civil Practice and Remedies Code § 41.003(a)](https://tcss.legis.texas.gov/resources/CP/htm/CP.41.htm), checked October 29, 2026
- [Texas Legislature, Civil Practice and Remedies Code § 41.008(b)(1)(B)](https://statutes.capitol.texas.gov/Docs/CP/htm/CP.41.htm#41.008), checked October 29, 2026