DEFINITION of 'Compensatory Damages'

Money awarded to a plaintiff to compensate for damages, injury, or another incurred loss. Compensatory damages are awarded in civil court cases where loss has occurred as a result of the negligence or unlawful conduct of another party. To receive compensatory damages the plaintiff has to prove that a loss occurred, and that it was attributable to the defendant. The plaintiff must also be able to quantify the amount of loss in the eyes of the jury or judge.

BREAKING DOWN 'Compensatory Damages'

Compensatory damages differ from punitive damages, which may compensate over and above any loss or damage incurred and are meant to provide an incentive against repeating the act that caused the plaintiff's loss or damages.


Cases related to compensatory and punitive damages are a major source of debate in the field of health insurance, as proponents of tort reform claim that excessive damages above the actual loss incurred increase the overall cost of healthcare.

RELATED TERMS
  1. Punitive Damages

    Legal recompense that is levied as punishment for a wrong or ...
  2. Collateral Source Rule

    A common law rule of evidence pertaining to punitive or other ...
  3. Covenant Not To Execute

    A lawsuit agreement in which the plaintiff agrees not to execute ...
  4. Contractors' All Risks (CAR) Insurance

    An insurance policy that provides coverage for both damage to ...
  5. Water Damage Insurance

    A type of protection provided in most homeowners insurance policies ...
  6. Joint And Several Liability

    When multiple parties can be held liable for the same event or ...
Related Articles
  1. Taxes

    The Real Cost Of Natural Disasters

    Earthquakes, hurricanes, oil spills and other disasters have a very real cost, but who foots the bill?
  2. Investing

    DuPont Ordered to Pay $10.5M Over Leaked Chemical

    DuPont stock was down Thursday after the company was ordered to pay an additional $10.5M in a lawsuit related to a chemical leak.
  3. Managing Wealth

    The Most Expensive Home Insurance Perils

    Floods, hurricanes, mold, earthquakes - the threats to your home are numerous.
  4. Investing

    Supreme Court Won't Hear Altria's Damages Appeal

    The U.S. Supreme Court declined to hear an appeal by Altria's (NYSE: MO) Philip Morris USA unit over a $25 million penalty it was assessed by a Portland, Oregon, jury in a case involving a smoker's ...
  5. Personal Finance

    Citigroup Sued by PIMCO Over Junk Mortgages

    On November 25, 2015, Allianz’s PIMCO unit and other investors filed a lawsuit against Citibank Inc in New York State court in Manhattan, alleging the New York based bank’s inability to properly ...
  6. Small Business

    Have Hogan and Thiel Forced Gawker into a Sale?

    Gawker Media, which is worth $83 million, may be forced to sell after being hit with $130 million in damages for publishing a sex tape.
  7. Insurance

    7 Reasons You Have a Love-Hate Relationship With Home Insurance

    What is covered in a policy can vary widely by company, so you’d better know what to look for when shopping for home insurance.
  8. Insurance

    Do You Need Casualty Insurance?

    Find out how different types of coverages can protect you and which policy is right for you.
  9. Financial Advisor

    Do You Dare Sue Your Broker?

    A financial damages claim is not for the fainthearted, but it may be worth it in the end.
RELATED FAQS
  1. What is the difference between legal liability and public liability?

    Discover the differences between a general legal liability, a specific public liability and a professional indemnity in the ... Read Answer >>
  2. Does homeowners insurance cover termites?

    Learn why termite damage is typically excluded from homeowners insurance policies and how you can take steps to prevent damage ... Read Answer >>
  3. Why do insurance policies have deductibles?

    Learn the basic concept of an insurance deductible and why they mitigate moral hazards and provide financial viability to ... Read Answer >>
  4. What are some ways a business owner can reduce unlimited liability?

    Understand how a fixed asset becomes impaired. Learn the accounting practices of impairing a fixed asset, and how it's recognized ... Read Answer >>
Hot Definitions
  1. Smart Home

    A convenient home setup where appliances and devices can be automatically controlled remotely from anywhere in the world ...
  2. Efficient Frontier

    A set of optimal portfolios that offers the highest expected return for a defined level of risk or the lowest risk for a ...
  3. Basis Point (BPS)

    A unit that is equal to 1/100th of 1%, and is used to denote the change in a financial instrument. The basis point is commonly ...
  4. Initial Public Offering - IPO

    The first sale of stock by a private company to the public. IPOs are often issued by smaller, younger companies seeking the ...
  5. Border Adjustment Tax

    A tax levied on goods based on where they are sold – exported goods are exempt from tax; those imported and sold in the ...
  6. Profit and Loss Statement (P&L)

    A financial statement that summarizes the revenues, costs and expenses incurred during a specified period of time, usually ...
Trading Center