Marwan bin al-Hakam wrote to Sayyiduna Mu'awiyah (may Allah be pleased with him) that a madman had committed a killing, (asking) what he should do. He wrote in reply: Do not kill him; take the blood money, for there is no retaliation upon a madman.
Hadith Referenceالسنن الكبرى للبيهقي / كتاب الجنايات / 15979