When filing a personal injury claim, the ultimate goal is to recover “damages.” In legal terms, damages refer to the monetary compensation awarded to an injured party. To ensure a fair settlement, the law categorizes these losses into two primary types: economic and non-economic damages. Understanding the distinction between the two is vital for accurately valuing a case.
What are Economic Damages?
Economic damages are the objective, out-of-pocket financial losses resulting from an injury. Because these damages have a specific dollar amount attached to them, they are usually easy to calculate using receipts, invoices, and employment records.
Common Examples of Economic Damages
- Medical Expenses: This includes past, current, and future costs for hospital stays, surgeries, physical therapy, and prescription medications.
- Lost Wages: Compensation for the time you were unable to work due to your injuries.
- Loss of Earning Capacity: If an injury is permanent and prevents you from returning to your previous career, you can claim the future income you would have earned.
- Property Damage: The cost to repair or replace your vehicle, especially relevant in motor vehicle accident claims.
What are Non-Economic Damages?
Non-Economic damages are subjective, non-monetary losses. They represent the “human cost” of an accident. Because these losses do not come with a price tag or a bill, they are often the most contested part of a personal injury settlement.
Common Examples of Non-Economic Damages
- Pain and Suffering: Compensation for the physical pain and discomfort caused by the injury and its treatment.
- Emotional Distress: Mental health impacts such as anxiety, depression, sleep loss, or PTSD.
- Loss of Enjoyment of Life: When an injury prevents you from engaging in hobbies, exercise, or social activities you once enjoyed.
- Loss of Consortium: Compensation for the negative impact an injury has on a person’s relationship with their spouse or family.
How are These Damages Calculated?
While economic damages are totaled by adding up bills, non-economic damages require a more complex approach. Insurance adjusters and attorneys often use one of two methods:
The Multiplier Method
This is the most common approach. The total of your economic damages is multiplied by a number (usually between 1.5 and 5) based on the severity of the injury. For example, a minor injury might use a 1.5 multiplier, while a life-altering injury might use a 5.
The Per Diem Method
This method assigns a specific dollar amount to every day you have lived with pain or limitations since the accident, continuing until you reach “maximum medical improvement.”
To successfully claim either type of damage, you must first prove the four elements of negligence were present in your accident.
Key Differences at a Glance
| Feature | Economic Damages | Non-Economic Damages |
|---|---|---|
| Nature | Tangible, Financial | Intangible, Personal |
| Evidence | Receipts, Paystubs, Bills | Testimony, Journals, Expert Opinion |
| Calculation | Mathematical Addition | Multiplier or Per Diem Methods |
| Caps | Rarely Capped | Sometimes capped by state law |
Conclusion
A comprehensive personal injury claim should account for both economic and non-economic damages to ensure the victim is “made whole” again. While the bills are the easiest to prove, the emotional and physical toll is often the most significant part of the recovery process. For more information on legal damage recovery, you can refer to the American Bar Association’s guide on Personal Injury Law.