Compensatory Damages

AAA

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.

INVESTOPEDIA EXPLAINS '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. Unsatisfied Judgment Fund

    An amount of money set aside by certain states to cover uncompensated ...
  2. Litigation Risk

    The possibility that legal action will be taken because of an ...
  3. Default Judgment

    A binding judgment issued by a court in favor of the plaintiff ...
  4. Holocaust Restitution Payments

    Money paid by the governments of Germany and Austria to partly ...
  5. Restitution Payments

    The payment of punitive damages that are owed as a result of ...
  6. Comparative Negligence

    A principle of tort law that applies to casualty insurance in ...
RELATED FAQS
  1. What is the difference between ex-ante moral hazard and ex-post moral hazard?

    Moral hazard refers to the way a party acts in a particular situation if protected against risk. It describes the behavioral ... Read Full Answer >>
  2. How do I become an underwriter?

    To become an insurance underwriter, you typically need a bachelor's degree. However, some employers may hire you as an underwriter ... Read Full Answer >>
  3. What country spends the most on healthcare?

    The United States currently ranks highest in health care spending. Of the countries spending the most on health care, the ... Read Full Answer >>
  4. What types of regulations are in place regarding fringe benefits?

    Government influence on non-salary employee benefits, also called "fringe benefits," comes, in large part, through the tax ... Read Full Answer >>
  5. Who are the best-rated life insurance companies in the US?

    There are several measures of what makes a life insurance company the best. The financial strength of an insurer is the most ... Read Full Answer >>
  6. What are some examples of when insurance bundling is a bad idea?

    Some insurance companies offer only one type of insurance, while others offer many different types. Insurance buyers often ... Read Full Answer >>
Related Articles
  1. Home & Auto

    The History Of Insurance In America

    Insurance was a latecomer to the American landscape, largely due to the country's unknown risks.
  2. Home & Auto

    How To Avoid Medical Debt

    Find out what you can do to avoid a financial meltdown when there's a medical emergency.
  3. Home & Auto

    When Things Go Awry, Insurers Get Reinsured

    Guru Warren Buffett is making this sector popular. Learn more here.
  4. Professionals

    Helping Clients Choose Long-Term Care Insurance

    The need for long-term care has become an inescapable (and pricey) issue for retirees. Here's what financial advisors can do to help.
  5. Stock Analysis

    3 Things That Could Hold Intuitive Surgical Back

    Taking a long-term view that favors Intuitive Surgical developer increasing in value, doesn't mean that there are near-term headwinds facing this company.
  6. Retirement

    Healthcare: What Are You Really Paying For?

    Long-term care costs rise fast and long-term care providers bundle services together, making it tougher for families to understand what they are paying for
  7. Retirement

    4 Myths You Don’t Know About Medicare

    Here are four common misconceptions about Medicare, the federal government’s health insurance program for people who are 65 and older or disabled.
  8. Professionals

    Does the Middle-Class Need LTC Insurance?

    Long-term care insurance is as expensive as it is necessary for many people, but is it right for all financial advisor clients?
  9. Insurance

    What Happens If Your Insurance Company Goes Bankrupt?

    When insurance companies go bankrupt or face financial difficulty, it's bad news for policy holders.
  10. Insurance

    Obamacare Penalty: What Actually Happens (& When)

    If you didn't have health insurance last year – or miss this year's deadline – how is the Affordable Care Act penalty enforced?

You May Also Like

Hot Definitions
  1. Venture-Capital-Backed IPO

    The selling to the public of shares in a company that has previously been funded primarily by private investors. The alternative ...
  2. Merger Arbitrage

    A hedge fund strategy in which the stocks of two merging companies are simultaneously bought and sold to create a riskless ...
  3. Market Failure

    An economic term that encompasses a situation where, in any given market, the quantity of a product demanded by consumers ...
  4. Unsystematic Risk

    Company or industry specific risk that is inherent in each investment. The amount of unsystematic risk can be reduced through ...
  5. Security Market Line - SML

    A line that graphs the systematic, or market, risk versus return of the whole market at a certain time and shows all risky ...
  6. Tangible Net Worth

    A measure of the physical worth of a company, which does not include any value derived from intangible assets such as copyrights, ...
Trading Center