Definition
Compensatory damages are a court-ordered payment meant to restore a person who was harmed by another’s negligence or unlawful act. The award is intended to cover the actual losses a plaintiff suffered — economic and non-economic — so the plaintiff is as close as possible to the position they would have been in had the harm not occurred.
Key terms (defined)
– Plaintiff: the person or party bringing the lawsuit.
– Defendant: the person or party being sued.
– Economic damages (also called actual or special damages): losses that can be measured in dollars, such as medical bills, repair costs, and lost wages.
– Non-economic damages (also called general damages): subjective harms that are not paid bills, such as pain and suffering, emotional distress, and loss of enjoyment of life.
– Punitive damages: payments intended to punish wrongful conduct and deter future wrongdoing; not designed to compensate the plaintiff’s losses.
– Treble damages: a statutory form of punitive relief that allows a court to award up to three times the compensatory award when a law has been willfully violated.
– Collateral source rule: a legal rule in some jurisdictions that prevents a defendant from reducing the award because the plaintiff received compensation from a third party (for example, insurance).
Types of compensatory damages
– Actual/economic damages: objectively verifiable monetary losses — medical and hospital bills, rehabilitation costs, property repair or replacement, and past/future lost earnings.
– General/non-economic damages: subjective or non-pecuniary harms like pain and suffering, mental anguish, loss of consortium, and loss of enjoyment of life.
How courts calculate non-economic damages
Courts use several approaches to put a dollar value on non-economic harms:
– Multiplier method: take the total actual/economic damages and multiply by a number (commonly between 1.5 and 5) that reflects the injury’s severity. This yields the general damages portion.
– Per diem method: assign a daily dollar amount to the plaintiff’s suffering and multiply that by the number of days the plaintiff is affected.
– Hybrid approach: combine elements of both methods depending on the facts and jurisdiction.
Burden of proof and evidence
To recover compensatory damages, a plaintiff generally must prove:
1. A loss occurred.
2. The defendant’s wrongful act or negligence caused that loss (causation).
3. The monetary value of the loss (quantification).
Evidence used includes medical bills and records, pay stubs and tax returns, expert testimony (medical, vocational, economic), receipts, and testimony about quality-of-life impacts.
How compensatory damages differ from other awards
– Versus punitive damages: compensatory awards make the injured party whole; punitive damages punish the defendant and discourage similar conduct. Punitive awards require a higher showing of fault (e.g., malice or willful misconduct).
– Versus treble damages: treble is a statutory multiplier of compensatory damages (typically up to three times) used in certain statutory violations; it functions as a punitive or deterrent remedy.
Common examples
– Economic: hospital bills of $25,000; lost wages of $10,000; vehicle repairs of $5,000.
– Non-economic: chronic pain, psychological trauma, loss of enjoyment of previously enjoyed activities.
Checklist — what a plaintiff should document
– Medical records and itemized medical bills.
– Pay stubs, tax returns, or employer letters showing lost earnings.
– Receipts for out-of-pocket expenses (transportation, therapy, home modifications).
– Photographs of injuries or damaged property.
– Diary or testimony documenting daily limitations, pain, or emotional effects.
– Expert reports (medical, vocational, economic) when future losses or complex valuation is involved.
– A clear account of how the defendant caused the harm (timeline, witness statements, incident reports).
Worked numeric example
Facts:
– Medical bills (past): $40,000
– Projected future medical care: $20,000
– Lost wages (past and projected): $30,000
Total economic (actual) damages = $40,000 + $20,000 + $30,000 = $90,000
If the court uses the multiplier method with a multiplier of 1.5 to calculate non-economic damages:
– General (non-economic) damages = 1.5 × $90,000 = $135,000
Total compensatory damages = actual damages + general damages = $90,000 + $135,000 = $225,000
If instead the court used a per diem of $150/day for 365 days:
– General damages = $150 × 365 = $54,750
– Total compensatory damages = $90,000 + $54,750 = $144,750
Notes and assumptions
– Valuation methods and multipliers vary widely by jurisdiction and case facts.
– Some jurisdictions limit non-economic or punitive awards by statute or cap damage amounts in particular case types (e.g., medical malpractice).
– Collateral source rules differ: in many states, insurance payments may not reduce an award; in others, courts allow offsets.
Summary points
– Compensatory damages reimburse actual losses (economic) and subjective harms (non-economic).
– The plaintiff must prove loss, causation, and a reasonable valuation of the loss.
– Calculation methods for non-economic harms include the multiplier method, per diem, or a hybrid approach.
– Compensatory awards are distinct from punitive and treble damages, which serve punishment or statutory deterrence.
Selected authoritative sources
– Investopedia — “Compensatory Damages” — https://www.investopedia.com/terms/c/compensatory-damages.asp
– Cornell Law School,
– Cornell Law School, Legal Information Institute — “Damages” — https://www.law.cornell.edu/wex/damages
– Nolo — “Compensatory Damages: Types and Examples” — https://www.nolo.com/legal-encyclopedia/compensatory-damages-overview-29731.html
– FindLaw — “Compensatory Damages” — https://injury.findlaw.com/damages/compensatory-damages.html
– American Bar Association — “Damages” (consumer legal resources) — https://www.americanbar.org/groups/public_education/resources/law_issues_for_consumers/damages/
Note: This content is educational only and does not constitute legal advice. Laws and procedural rules vary by jurisdiction; for case-specific guidance, consult a licensed attorney in the relevant state or country.