Please note this is a general post and I'm not claiming anything other than posting "general information"
The general rule is that the honors of Muslims are protected and their inviolability is confirmed. "And those who annoy believing men and women undeservedly, they bear (on themselves) the crime of slander and plain sin." [Surat Al Ahzab: 58].
"O you who believe! Let not a group scoff at another group, it may be that the latter are better than the former. Nor let (some) women scoff at other women, it may be that the latters are better than the formers. Nor defame one another, nor insult one another by nicknames. How bad is it to insult one's brother after having Faith [i.e. to call your Muslim brother (a faithful believer) as: "O sinner", or "O wicked"]. And whosoever does not repent, then such are indeed Zâlimûn (wrong-doers, etc.)." [Surat Al Hashr: 11].
The Messenger of Allah (peace be upon him) said: "A Muslim is the one who avoids harming Muslims with his tongue and hands.".
It was reported in Al Adab Al Mufrad with an authentic chain of transmission on the authority of `Abdullah ibn Mas`ud that the Prophet (peace be upon him) said: "A true believer is not involved in taunting, frequently cursing (others), in indecency, or in abusing." 
This Hadith denotes that leaving slander, cursing, indecency and abusing is obligatory and committing any of these bad qualities is forbidden, and abstaining from these qualities is obligatory. 
Moreover, the Prophet (peace be upon him) said explicitly: "It is enough evil for a Muslim to look down upon his Muslim brother." "A Muslim is inviolable to his Muslim brother in regard to: his blood, honor, and property;" this inviolability is highly confirmed. The Messenger (peace be upon him) said: "Verily! Your blood, property and honor are sacred to one another (i.e. Muslims) like the sanctity of this day of yours, in this month of yours and in this city of yours. It is incumbent upon those who are present to inform those who are absent."
Thus, the Prophet correlated between these three matters [blood, property, and honor] which must be protected by the Shari`ah and it is beautiful to glorify the sanctity of blood and money, and it is bad to neglect the third [i.e., honor].
When slandering a Muslim of that seriousness, the Prophet (peace be upon him) explained the ruling of the one who violates it; therefore, the Messenger of Allah (peace be upon him) said: "Abusing a Muslim is Fusuq (an evil doing)." 
This Hadith and other Hadiths denoted that slandering a Muslim is one of the major sins. Al Haythamy said in Az-Zawajir `An Iqtiraf Al Kaba'ir: Major sin No. 289, 290, and 291 are: Insulting and slandering a Muslim, a man is being a cause for cursing and slandering his parents even if he does not do that himself, but by cursing a Muslim. Many scholars said that cursing a Muslim is a major sin and when a Muslim is insulted, the insulter should be punished; some people reported consensus for this ruling. The Shafi`y and the Hanbaly school of Fiqh said: Hinting is like clear insult. 
Some scholars said: "Cursing and slandering a Muslim in his honor without right is forbidden by the consensus of scholars and its doer is dissolute." 
Because of the seriousness of insulting a Muslim's honor with the tongue, scholars said: Insulting a Muslim by cursing is not permissible even if it is done by the ruler as a kind of rebuke. Some jurists said: "It is not permissible for the ruler or someone else to rebuke someone by cursing, obscene insult, or cursing his parents. However, it is permissible to rebuke a person by saying: O oppressor, aggressor, and so on." 
It is not permissible for the owner to punish his slave by insult. Imam Ahmad said: It is not permissible to insult the slave's unbelieving parents, a person should not get used to insult and curse, and the one who is of bad manners [insulting and slandering his slaves] shall not enter Paradise.
"So, whoever commits a forbidden vile thing has committed a forbidden matter for which he shall be punished. This discretionary punishment is left to the view of the ruler according to his view, within the limit of interest, and according to the Shari`ah.
The conditions of people are different because each one has what suits him." 
Words which slander honors are of two types:
1- Words which slander the honor of the insulted only and does not harm anyone else; and that is of two types: Lying and obscene words.
2- Words which may harm others; and that is of four types Backbiting, tale bearing, corrupting the relationship between people, and insult.
Perhaps false accusation is more affecting to the hearts, therefore Allah forbade it by imposing a prescribed punishment for it and calling the slanderer a Fasiq (dissolute)." 
Insult as mentioned by Ibn Wahban is either by bad qualities which a Muslim has or by bad qualities which are not present in him, either in his presence or while he is absent.
If the person has none of these bad qualities, it will be a mere lie and falsity which make a person Fasiq whether it was said in his presence or in his absence. If this insult was said in his presence, the sayer shall be a Fasiq. However, if the insult is said in his presence, it is a bad manner and only low people who do so because they have no shyness or good manners. "Abusing a Muslim is Fusuq (an evil doing) and killing him is Kufr (disbelief)."  If we know this origin, it will be known that all ugly talks such as false accusation or less is considered an insult which is not permissible, moreover its sayer should be punished.
Ibn Hazm reported from some of the Prophet's Companions that the Messenger of Allah (peace be upon him) lashed a man because he insulted another by saying: "O son of the crazy man." 
Because of what has been mentioned earlier, the jurists spoke about the estimation of these discretionary punishments such as what has been mentioned in Al Masa'il Al Malqutah. The author said: If a man said to another: O traitor, or O bull, or O donkey, or O son of a donkey, he shall be punished as Ibn Rushd said [p. 78].
● He who says to a man: O criminal, he shall be beaten twenty-five lashes. Likewise if someone says to him: O oppressor, and he was not as such, he shall be beaten 40 lashes.
● If someone says to another: O robber, he shall be beaten twenty-five lashes [p. 81].
● Whoever speaks badly about a scholar should be punished 40 lashes [p. 82].
● Whoever says to a person, O debaucher, shall be punished with 80 lashes [p. 83].
● Anyone harms a Muslim with his tongue should be punished by equivalent punishment: His head may be lashed by a whip, his head may be lashed by a stick, or his back may be lashed by a stick according to the status of the sayer and the status of the insulted person [p. 83].
● If someone says to another person: Allah is greater than you, he shall be punished unless the insulted pardons his opponent [p. 84].
● A person should be punished for all kinds of insults, such as: O dog, pig, donkey, or something of the like [p. 84].
A ruler may punish an aggressor as part of applying the Shari`ah of Allah and reconciling between two opponents. This call for the application of Shari`ah is to stop sedition and guarding tongues by the power of the ruler. However, the one who wants to apply the Sunnah should be impartial and should not retaliate for himself. "And indeed whosoever takes revenge after he has suffered wrong, for such there is no way (of blame) against them." [Surat Ash-Shura: 41] and that does not contradict Allah's Command: "Show forgiveness, enjoin what is good, and turn away from the foolish (i.e. don't punish them)." [Surat Al A`raf: 199].
This command is precise according to the correct view of scholars. Ibn Al Qayyim (may Allah bestow mercy on his soul) said: (and turn away from the foolish) means: If the foolish insults you, do not insult him back. Allah (may He be Exalted) says: "and when the foolish address them (with bad words) they reply back with mild words of gentleness." [Surat Al Furqan: 63].
According to this view, it is not abrogated, but the meaning is: turn away while displaying the proof to him and in the meantime do not retaliate for yourself." 
So, the two Ayahs exhort to exchange bad deeds with good deeds, and do not exhort to leave the ruling of Allah in regard of the prescribed punishments or discretionary punishment, moreover the Ayahs link between exhortation and pardon if it is correlated with reform. Allah (may He be Exalted) says: "The recompense for an evil is an evil like thereof; but whoever forgives and makes reconciliation, his reward is with Allâh. Verily, He likes not the Zâlimûn (oppressors, polytheists, and wrong-doers)." [Surat Ash-Shura: 40].
It is important to differentiate between the person who is used to insult people and he who insults people by accident. The one who insults by accident should be pardoned, and his slip is forgiven because he is deterred by good treatment and guidance and often he hastens to apologize as long as he is conscientious even if he is not one of the knowledge seekers. However, if he is used to insult people, submitting him to court is a kind of deterring the criminal.
Of the positions which may be permissible to insult a person in without using false accusation, calling him as a disbeliever, and cursing his parents. Allah (may He be Exalted) says: "The recompense for an evil is an evil like thereof; but whoever forgives and makes reconciliation, his reward is with Allâh. Verily, He likes not the Zâlimûn (oppressors, polytheists, and wrong-doers)." * "And indeed whosoever takes revenge after he has suffered wrong, for such there is no way (of blame) against them." [Surat Ash-Shura: 40 - 41].
So, it is permissible to retaliate with justice although pardon is better. The Prophet (peace be upon him) said: "When two persons indulge in hurling (abuses) upon one another, it would be the first one who would be the sinner so long as the oppressed does not transgress the limits." 
Of the positions, which are permissible to decrease the rank of the opponents in, is describing him with injustice, lewdness, and so on; these qualities may be applied to a certain person who commits oppression or lewdness on two conditions:
1- To do that for a purpose not for humor or mockery at his honor. Al Qarafy said: "I asked a group of scholars about those who narrate the Prophet's saying: "There is no backbiting regarding a lewd."
They said to me: The Hadith is not valid, and it is not permissible to mock at the debaucher's honor. This is the summary of the disagreement concerning the permissible and impermissible backbiting." 
2- The insulted should have the qualities which the offender said about him, but if these qualities are not present, it is not permissible. Shaykh Al Islam said: "I always forbid people to attribute a certain person to disbelief, lewdness, or sin, unless you know that the proof was set against someone who does so. I say that Allah has pardoned this nation in regard to its mistakes either in sayings or actions." The permissibility of these kinds does not mean that the field is open for backbiting. However, if backbiting was done by a person who is not entitled to issue a judgment and does not have power over people, the opponent has the right to sue him.
 Reported by Al Bukhari in his Sahih from the Hadith of `Abdullah ibn `Amr 1/13  and Muslim from the Hadith of Jabir 1/65 (41).
 Al Adab Al Mufrad, 1/116 (312).
 See: Al Iman Al Kabir P. 10 and the next pages, and it is mentioned in Al Majmou` 7/14 and the following pages.
 Sahih Muslim 4/1986 (2564).
 Reported by Al Bukhari and Muslim from the Hadith of Abu Bakrah, see Sahih Al Bukhari 1/37 (67) and Muslim 3/1305 (1679).
 Reported by Al Bukhari and Muslim 1/27 (48) and Muslim 1/81 .
 2/92 and the following pages.
 Islamic Jurisprudence Encyclopedia 24/141.
 Islamic Jurisprudence Encyclopedia 21/272.
 See Islamic Jurisprudence Encyclopedia 16/328.
 Islamic Jurisprudence Encyclopedia, 10/230.
 Adab Ad-Dunya wad-Din, P. 323 - 324.
 Reported by Ibn Nujaym in Al Bahr Ar-Ra'iq 7/89 - 90.
 See Al Muhalla 12/222 - 223, the Hadith was graded as weak by Ibn Hazm because of three reasons: 1- It is a Mursal Hadith (the Companion is not mentioned in the Hadith). 2- It was reported from the way of Salim ibn Ghaylan At-Tajiby whom is unknown and not a trustworthy.
3- Yunus ibn `Abdul-A`la was more memorizing than Suhnun who reported the Hadith. The more correct view is that it is a good Hadith. As for it is being a Mursal Hadith, the chain of transmission is authentic and the ambiguity of the Companion does not harm and the general rule of such Hadiths is the continuation of the chain of transmission according to the majority of scholars. As for the memorization of Yunus ibn `Abdul-A`la is better than Suhnun, it is true, however Suhnun did not reported it alone. The Hadith was reported by Hammad ibn Yahya from Ibn Wahb. That was mentioned in Ma`rifat As-Sahabah of Abu Nu`aym. As for Salim ibn Ghaylan, see the comment of Ibn Hajar in Lisan Al Mizan 1180, the profile of Isma`il ibn Muhammad As-Saffar. Imam Ahmad, Abu Dawud, An-Nasa'y, Ibn Hibban, and others graded Salim as trustworthy. Adh-Dhahaby said: He is trustworthy. Ibn Hajar said: He is okay.
 Al Masa'il Al Malqutah Min Al Kutub Al Mabsutah of Abrahim ibn Farhun.
 Madarij As-Salikin, 2/305.
 Muslim 4/2000 (2587).
 Anwar Al Bruq Fi Anwa` Al Furuq 4/208.
 See Al Majmu` 3/229.