Compensatory Damages

In civil law, the term “damages” refers to the sum of money that may be awarded to a party in compensation for an injury, damage to property, or other loss. There are two types of damages that may be awarded by the court, “compensatory,” and “punitive.” Compensatory damages, also referred to as “actual damages,” provide a plaintiff with the amount of money necessary to restore them to the financial state they were in prior to the action, or to replace what was lost. To explore this concept, consider the following compensatory damages definition.

Definition of Compensatory Damages

Noun

1. An award of money in compensation for actual economic loss, property damage, or injury, not including punitive damages.

Types of Damages

In civil lawsuits, damages are classified as either “compensatory” or “punitive.” Compensatory damages are further broken down into “special damages,” and “general damages.” While special damages cover economic losses, damage to personal and real property, and medical expenses, general damages offer compensation for non-economic, non-tangible issues such as pain and suffering, and emotional distress.

General Damages

General damages may be awarded to a person who has suffered some specific, personal harm. Such losses may include:

• Pain and suffering – physical distress caused by an injury, including aches and pains, scarring, permanent or temporary limitations on activity
• Emotional distress – emotional distress caused by a physical injury, physical contact, sexual harassment, libel, or slander.
• Loss of consortium – being deprived of the benefits of a normal family relationship due to an injury or death caused by the acts of another. Also referred to as “loss of companionship,” this may be the inability of a spouse to provide the same love and affection, comfort, society, or sexual relations as he or she did before the injury.
• Defamation – the intentional communication, whether written or spoken, of false information that harms the reputation of a person or entity. May include any false information or groundless criticism that results in the decreased respect, regard, or confidence of the person or entity, or that provokes hostile or disparaging feelings against them. Also referred to as “loss of reputation.”
• Disfigurement – to cause a permanent change in a person’s body or appearance, such as an injury that leaves scars.
• Loss or impairment of physical or mental capacity – the loss of a person’s ability to physically care for himself, or to think clearly or make decisions for himself.
• Loss of enjoyment of life – loss of a person’s ability to participate in and enjoy the activities and pleasures of life as experienced prior to the injury.

These issues are not easily defined or measured, and often depend on the exact circumstances and nature of the injury. In difficult cases, many judges make awards based on the outcome of previous, similar cases.

Special Damages

Designed to return a party in a civil lawsuit to the position they were in prior to an accident or injury, special damages include an order for money to be paid to cover medical expenses, damage to personal or real property, and possibly loss of earnings. Special damages are awarded on determinable dollar amounts of the actual loss. Damages to personal property are generally compensated at the value of the item at the time of the loss, meaning the “used” and “depreciated” value of the property.

Punitive Damages

Also referred to as “exemplary damages,” punitive damages are awarded only in special cases where the acts of the defendant are found to be egregious, intentional, and especially harmful. Punitive damages are awarded for the express purpose of punishing the defendant, and to deter future similar acts, rather than to enrich the plaintiff. Generally speaking, punitive damages are not awarded in contract cases, unless it is proven one party has acted with the intent to defraud the other party.

Case Involving Punitive Damages

Compensatory damages are awarded for a variety of issues every day in American courts. Some of these cases have made headlines, but are still not well understood by the public.

Liebeck v. McDonald’s Restaurants

In this well-publicized 1992 case, 79-year old Stella Liebeck spilled a cup of McDonald’s coffee in her lap, sustaining third degree burns to both legs. The severity of the full-thickness burns required skin grafts. When McDonald’s denied Liebeck’s request to pay her medical bills, she filed a lawsuit.

During the course of the case, it was discovered McDonald’s had received hundreds of other complaints from customers complaining that their coffee had caused severe burns, and that the corporation’s operations manual specified the coffee was to be kept at 180-190 degrees Fahrenheit. It is known that liquid at that temperature, if spilled onto a person, causes third degree burns in three to seven seconds.

A jury awarded Liebeck $200,000 in compensatory damages to pay for medical bills and other related expenses. Because it was clear the company knew their coffee was dangerous and could cause serious injury, yet did nothing to rectify the situation, the jury also awarded Liebeck $2.7 million in punitive damages, which amounted to the company’s sales revenue from just two days of coffee sales.

Related Legal Terms and Issues

• Depreciated Value – a decrease in the value of an item due to normal, everyday wear and tear, age, decay, and decrease in price.
• Economic Loss – Financial loss incurred by an individual or entity as a result of property damage, theft, injury, death, or other acts by a third party.