Economic vs Non-Economic Damages in Personal Injury (Explained)
When someone files a personal injury claim in the United States, the compensation they seek is divided into two main categories. One is economic damages, and the other is non-economic damages. It is important to understand the difference between these two groups, as well as how each one is calculated, as it has a direct impact on the total value of a claim.
The Main Difference Between Economic And Non-Economic Damages
Economic damages are financial losses that can be measured with exact numbers. This includes medical bills, pay stubs, and receipts that provide a clear paper trail.
Non-economic damages are just as real but much harder to count. It covers things like physical pain, emotional suffering, and the loss of enjoyment of life. These are genuine losses that do not come with an invoice.
While both types of damages can be recovered in a personal injury case, the process becomes complex. It is important to understand how they are calculated and whether state laws put a limit on how much you can receive.
What Qualifies As Economic Damages?
Economic damages generally cover medical expenses like emergency care, hospital stays, surgery, rehab, and the cost of any treatment you will need in the future.
They also include lost wages from time missed at work, which are proven with pay stubs. If your injuries permanently limit your ability to work or earn as much as you did before, then you can claim for loss of earning capacity as well.
Additionally, you can recover costs for property damage, such as car repairs, and out-of-pocket expenses like transportation to doctors, home care, or medical equipment.
You also need to account for the future economic damages. These include projected medical bills and lost income for the rest of your life. Experts, like economists and medical professionals, can help to calculate the total financial impact in today’s dollars.
What Qualifies As Non-Economic Damages?
Non-economic damages are less simple than bills, but are just as valid. It covers physical pain and suffering, chronic discomfort, and the daily impact of your injuries. They also include emotional distress, such as anxiety, depression, and PTSD.
If you can no longer participate in the hobbies and activities you loved before the accident, you can claim damages for loss of enjoyment of life. Additionally, these damages account for loss of consortium, which is the negative impact on a spousal relationship, and disfigurement.
According to the Insurance Information Institute, non-economic damages actually make up the majority of compensation in serious personal injury cases. They often far exceed the cost of medical bills in claims involving life-changing injuries.
How Non-Economic Damages Are Calculated
There are two common ways to figure out the value of non-economic damages.
1. Multiplier Method
The first is the multiplier method. Here, your financial losses are multiplied by a number, usually between 1.5 and 5, depending on how severe the injury is. For example, a $50,000 medical bill with a multiplier of 3 would result in $150,000 for pain and suffering.
2. Per Diem Method.
The second is the per diem method. This method assigns a specific dollar amount to each day you have to live with the injury’s effects.
Neither method is an exact science. Juries have a lot of freedom to decide these amounts. The final awards can vary greatly even between cases that seem very similar.
Punitive Damages
A third category called punitive damages exists for cases involving especially shocking or harmful behavior. These are not meant to pay the victim back for their losses. Instead, they are designed to punish the defendant and discourage others from acting the same way.
To receive these damages, you must prove there was malice, fraud, or extreme carelessness. This is a much higher legal standard than just a simple mistake. While they are relatively rare, these awards can be very large when a court decides they are necessary.
If you are involved in a personal injury case, talk to a lawyer today!
