What Is the Difference Between Economic and Non-Economic Damages?

In personal injury cases, compensation is categorized into two primary types: economic and non-economic damages. Economic damages are based on tangible financial losses, while non-economic damages address more subjective, intangible harms such as pain and suffering. Understanding the difference between these types of damages is crucial for determining the full extent of compensation a victim may be entitled to.

What Is the Difference Between Economic and Non-Economic Damages?

1. Economic Damages (Tangible Losses):

Definition: Economic damages are compensation for direct financial losses that can be objectively quantified and calculated. These damages are typically easier to prove as they involve actual monetary costs or losses resulting from the injury.

Types of Economic Damages:

Medical Expenses:

This includes all healthcare costs associated with the injury, such as hospital bills, doctor’s fees, surgeries, physical therapy, prescription medications, and any future medical treatments needed for recovery.

Lost Wages:

Compensation for wages or salary lost due to the inability to work during recovery. This includes both past wages and any future income loss if the injury affects the person’s ability to return to work or work at full capacity.

Loss of Earning Capacity:

If the injury causes long-term or permanent disability that affects the individual’s future earning ability, they can claim compensation for the reduced ability to earn money.

Property Damage:

If property, such as a vehicle, is damaged during the accident or incident, the cost of repair or replacement is included as part of economic damages.

Out-of-Pocket Expenses:

Any additional costs incurred as a result of the injury, such as transportation to medical appointments, hiring help for household chores, or any other related expenses, are also considered economic damages.

2. Non-Economic Damages (Intangible Losses):

Definition: Non-economic damages are compensation for subjective, intangible harm caused by the injury that cannot be directly measured in monetary terms. These damages are more difficult to calculate and typically involve the emotional, psychological, and lifestyle impacts of the injury.

Types of Non-Economic Damages:

Pain and Suffering:

Compensation for the physical pain and emotional distress caused by the injury. This includes both immediate pain and long-term discomfort, as well as the emotional toll it may have on the victim’s quality of life.

Emotional Distress:

Psychological harm, including anxiety, depression, trauma, or PTSD, resulting from the injury. Non-economic damages can compensate the victim for the mental anguish caused by the accident and its aftermath.

Loss of Enjoyment of Life:

When an injury prevents the person from engaging in activities they once enjoyed (such as hobbies, sports, or socializing), compensation is awarded for the loss of enjoyment of life.

Loss of Consortium:

This refers to the loss of companionship, intimacy, and affection due to the injury. Spouses or family members of the injured party can claim this form of non-economic damages.

Disfigurement:

If the injury results in permanent scarring or disfigurement, compensation may be awarded for the emotional and psychological impact of the changes to the victim’s appearance.

Key Differences Between Economic and Non-Economic Damages

1. Tangibility:

Economic Damages are tangible and quantifiable. They can be easily proven through bills, receipts, and payroll records.

Non-Economic Damages are intangible and subjective. They are more difficult to quantify because they involve emotional and psychological effects that don’t have a direct monetary value.

2. Calculation Method:

Economic Damages are calculated by adding up actual financial losses. For example, medical bills, lost wages, and property damage can be itemized and directly linked to the injury.

Non-Economic Damages are harder to calculate. Courts often use methods like multiplying the economic damages by a certain factor (based on the severity of the injury) or applying a per diem method to assign a daily value to pain and suffering.

3. Purpose:

Economic Damages compensate for specific financial losses and the victim’s immediate costs, such as hospital bills and lost income.

Non-Economic Damages compensate for the more personal and intangible consequences of the injury, like the pain, emotional toll, and the effect the injury has on the victim’s lifestyle and relationships.

Legal Actions and Protections

Filing a Personal Injury Lawsuit:

In personal injury cases, victims can file a lawsuit to claim both economic and non-economic damages. The injured party must provide evidence of the economic losses, such as medical records and employment records, and also demonstrate the impact of the injury on their mental and emotional well-being, typically through testimony and expert evidence.

Consulting a Lawyer:

An experienced personal injury lawyer can help victims evaluate both economic and non-economic damages in their case, ensuring they receive a fair and comprehensive settlement or judgment. Lawyers use various strategies to maximize the compensation for both tangible and intangible losses.

Example

If a person is injured in a car accident:

Economic Damages:

• Medical Expenses for hospital bills, surgery, and physical therapy.
• Lost Wages for the time spent recovering and unable to work.
• Property Damage for the repair of their damaged car.

Non-Economic Damages:

• Pain and Suffering for the physical pain and distress caused by the injury.
• Emotional Distress for the anxiety or depression resulting from the accident.
• Loss of Enjoyment of Life if the injury prevents them from participating in activities they once enjoyed, such as hiking or playing sports.