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.