What are compensatory damages?

Compensatory damages are financial legal remedies (i.e. money) paid to an individual who has been injured by the wrongful actions of another party.

“Injury” in the legal sense does not only mean physical harm. It can also refer to psychological harm, emotional distress, harm done to one’s finances, property, or reputation, diminished ability to enjoy one’s life, the loss of a legal right, or breach of contract.

An injury, in other words, is anything that has a cost to the victim. And damages are paid to the victim to compensate them for injury-related costs.

The amount of damages paid to the plaintiff by the defendant in a lawsuit depends on the type of injuries they have suffered. In drug and medical device cases, for example, damages typically cover:

  • Medical bills
  • Lost wages
  • Physical and mental pain and suffering
  • Disability or disfigurement
  • Loss of ability to take part in family, social or recreational activities

Economic vs. Non-Economic Damages

In the above examples, note the difference between “economic” damages (those that are tied to a specific monetary amount, such as hospital bills and missed time from work) and “non-economic” damages (such as pain and suffering, which does not correlate with an exact dollar amount, but is nonetheless a very real source of harm).

While economic damages are calculated in a straightforward manner, non-economic damages are more subjective. An experienced attorney works with the victim and experts to translate into a dollar amount those losses which aren’t strictly monetary in nature. It’s not unusual for the amount of non-economic damages to exceed the amount of economic damages in a drug or device lawsuit.

Non-Economic Damages Not Always Available

In contrast to cases involving physical harm, lawsuits that involve stocks and securities fraud, business and tax fraud, and other types of monetary losses are limited to economic damages. That is, in these types of lawsuits, non-economic damages for things like emotional suffering and diminished quality of life are generally not recoverable.