The Differences Between Economic and Noneconomic Damages and How to Calculate Them


When you are involved in a personal injury lawsuit, there are two different types of compensatory damages that you can seek: economic and noneconomic. There is a difference in both the kinds of damages that you seek compensation for, as well as how they are calculated and awarded.

Compensatory damages are a specific type of damage that an injury attorney will seek in court. They are awarded to compensate someone for what they have lost either physically or mentally. In the eyes of the law, civil cases are meant to try to return someone to being “whole” by providing them the means necessary to give them back what they have lost.

What do economic damages encompass?

When someone seeks to be awarded economic damages, those are damages that are both real and concrete. In personal injury cases, economic damages are things like medical bills, procedural costs, and lost wages. They’re easier to calculate; the jury who finds for the plaintiff will add up the number of actual costs that a person has incurred and award the economic damages accordingly.

What do noneconomic damages encompass?

Noneconomic damages are less concrete and are awarded subjectively through calculating the amount someone has suffered, or what something has cost them in an economic way. Things that fall under noneconomic damages are things like pain and suffering, loss of consortium and emotional distress. Much harder to prove in a court of law, they aren’t just something that the jury can easily add up through documents; they must make a subjective decision about what someone’s pain and suffering is “worth.”

How are noneconomic damages calculated?

Due to the uncertainty and subjective nature of noneconomic damages, there are various ways that a jury can use to come up with a monetary award. An effective attorney will explain to the jury the way to calculate damages that is most favorable to his client.

The first way is by using the multiplier method. The jury will consider the severity of the injuries according to how extensive they are, and ascribe a number from 1 to 5. They will then calculate the total economic loss and will use the multiplier they have determined in severity to multiply the economic damages, to determine the noneconomic damages. Then the total of the two becomes the compensation award.

The daily rate method is when the jury uses your daily rate of “suffering” as a multiplier for your noneconomic damages. Using a number ranging from 1.5 to 5, the jury will determine the daily amount that should be awarded. For instance, if your injury had you out of work for 400 days and the daily amount they awarded is $200 a day, then you would be awarded $80,000.

What is a compensatory cap?

Some states have laws the place a cap on certain noneconomic damages this is sometimes referred to as a compensatory cap. These typically cap the amount that someone is entitled to for pain and suffering at a maximum amount, often these damages are capped at $250,000 plus the amount of economic damages for a total award.

Doctors and the insurance companies argued that high award amounts were making medical insurance costs rise to such an extent that it was causing doctors to leave certain states and thus harming patients. Although this argument has been shown to be false, the insurance industry used it and claimed that it was forced to pass on the increased cost of litigation to doctors and hospitals.

If you are injured in an accident or a part of civil litigation, it is important to know how the damages are calculated and what type of documentation you will need to prove your case in order to receive fair compensation. Before you accept any settlement, you should always have an attorney help you to determine whether the settlement is fair in light of your injuries and other losses.

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