What is 'Compensatory Damages'

Compensatory damages is 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. Compensatory damages are intended to compensate the plaintiff of a lawsuit with enough money to cover the loss caused by the defendant. Compensatory damages can be classified as two types: actual and general.

Actual damages are intended to provide the monetary amount necessary to replace what was lost and nothing more. 

Actual compensatory damages include:

  • Medical and hospital bills
  • Medical treatments
  • Rehabilitation expenses
  • Physical therapy
  • Ambulance expenses
  • Medicine and Prescription drugs
  • Nursing home care
  • Domestic services
  • Medical equipment
  • Lost wages or lost employment income
  • Increased living expenses
  • Property replacement or repair
  • Transportation

To be awarded actual compensatory damages, the plaintiff must prove that losses suffered equate to a defined monetary value. 

General compensatory damages, meanwhile, include estimates of loss not involving actual monetary expenditure. Some courts use the "multiplier method," which calculates general damages by multiplying the sum total of one's actual damages by a number that signifies the seriousness of injury. In other jurisdictions, courts will use the "per diem" method, which attaches a dollar value to each day a plaintiff suffers and adds the value of all those days together. In some cases, a court will use a hybrid of these two methods to calculate general compensatory damages.

General compensatory damages include:

  • Mental anguish
  • Disfigurement
  • Future medical expenses
  • Future lost wages
  • Long-term physical pain and suffering
  • Loss of consortium
  • Inconvenience
  • Loss of enjoyment of life
  • Loss of opportunity

Compensatory damages are typically awarded in medical malpractice lawsuits, usually for medical bills, hospital bills, rehabilitation expenses and compensation for lost earnings. Some compensatory damages can be difficult to assess. For example, the value of lost wages will be much higher for a more affluent member of society versus someone who is poor or retired.

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