Compensatory and Punitive Damages in Personal Injury Cases

If you suffer injuries in a preventable accident and plan to file a personal injury claim, even if you have the help of an experienced attorney, chances are you’ll encounter some legal terminology that feels unfamiliar to you. We’re here to explain two terms you will likely hear your attorney use: compensatory damages and punitive damages. Let’s explore what they mean and the roles they typically play in a personal injury case.

What Are Compensatory Damages?

In broad terms, you and your attorney are filing a personal injury case to seek compensation for your injuries and losses. You want to obtain this compensation from the parties who have a legal obligation to answer for them. (Lawyers refer to this obligation as liability). Compensatory damages reflect a lawsuit’s primary goal of obtaining compensation for you. Lawyers use this term to refer to the many different types of compensation you should receive as payment for the physical, emotional, and financial harm you have suffered. Or, as one popular legal maxim goes, compensatory damages aim to make the injured party (you) whole again. Of course, that’s not quite what they do. A lawsuit cannot actually make you whole, in the sense that it cannot take away your pain, bring back a loved one who tragically perished, or mend a broken bone. Instead, compensatory damages constitute money paid to you by the party with liability. Ideally, the amount of money you are entitled to should correspond to the scope and severity of the harm you suffered. To make the process of calculating that amount more straightforward, the law generally recognizes two categories of compensatory damages: economic damages and non-economic damages.

What Are Economic Damages?

Economic damages are one category within compensatory damages. They are also sometimes called monetary damages, pecuniary damages, actual damages, or special damages. They represent the direct financial cost of a personal injury, meaning they are mostly made up of out-of-pocket expenses and other identifiable, quantifiable costs like:

• Current and future medical expenses involved in treating a personal injury
• Current and future wages or income lost because of an injury, such as when an injury prevents you from working
• Other out-of-pocket expenses you incurred, or will incur, because of an accident or injury, such as costs of repairing or replacing damaged property, or of modifying your home to accommodate an injury-related disability

The economic damages component of compensatory damages, in other words, seeks to reimburse you for the money you have lost, or will likely lose, because of your personal injury. Most importantly, these expenses can be tracked and proven via receipts, bills, and more.

What Are Non-Economic Damages?

Non-economic damages—also known as general damages, non-pecuniary damages, or non-monetary damages—account for all of the other types of harm a personal injury can cause that have no fixed dollar value associated with them. They consist of subjective, but undeniably real, harms like:

• Physical pain
• Emotional anguish
• Diminished enjoyment of life
• Impairment or loss of personal and intimate relationships
• Scarring and disfigurement

Whereas economic damages can reasonably pay you back dollar-for-dollar your losses, non-economic damages try to assign a dollar amount to the more abstract difficulties that have entered your life as a result of the accident. These struggles have no agreed-upon monetary value, but it is your attorney’s job to translate them into financial terms and show how they have impacted you. Non-economic compensatory damages try to answer seemingly impossible questions like “What is the value of the use of your arm?” or “How much money would you take to live with chronic back pain for the rest of your life?” or “What amount of money compensates the loss of a child?” You cannot easily put a price tag on things like these. That’s why non-economic damages can often test the limits of the law’s ability to address human suffering. Amounts can sometimes seem arbitrary, and differences in state laws may dictate how exactly to calculate them or limit their size. Yet, imperfect as they are, non-economic damages also manage to give personal injury victims and grieving families some measure of justice and compensation for these injuries and tragedies they never would’ve chosen to suffer through. They also serve as a powerful and necessary means of holding wrongdoers accountable, so that engaging in dangerous actions cannot (or at least should not) simply be reduced to an economic cost-benefit decision.

What Are Punitive Damages?

As we said above, personal injury lawsuits primarily aim to compensate you for your injuries and losses. But that’s not all they do. Sometimes, suing someone for a personal injury also serves a secondary purpose of expressly punishing the party who harmed you and deterring that party (and others) from engaging in such harmful conduct in the future. Now, normally, simply suing someone can act as a punishment and deterrent in its own right. The party you sue usually must bear the cost of defending themselves against your claim by hiring a lawyer, spending time and effort on the pre-trial discovery, and enduring the overall strain of facing legal and financial liability for having harmed you. That is why the mere threat of getting sued often influences how people, businesses, and others act. Sometimes, however, the situation calls for a more specific, targeted remedy for wrongdoing. Punitive damages, also called exemplary damages, serve as a means of directing specific punishment and deterrence at parties who caused harm to others in, especially outrageous or reckless ways. Courts award them in those rare, extreme cases. Punitive damages are additional damages, over and above compensatory damages, that are paid out to the injured party or sometimes to third parties. Injured parties can ask courts to award punitive damages, but the decision to award them is ultimately left up to the discretion of a judge or jury. The injured party rarely has an absolute right to receive punitive damages. Some common examples of instances in which a court might award punitive damages include:

• Motor vehicle accidents involving extreme misconduct like drunk driving or racing on public roads
• Violent crimes such as sexual assault
• Intentionally withholding or falsifying information consumers need to evaluate the safety of a consumer product
• Maintaining and exposing visitors to unreasonably dangerous property conditions, knowing they will likely get hurt
• Performing unwarranted medical procedures on patients as a means of billing extra for medical care

Compensatory and Punitive Damages in Settlements

Most personal injury cases get resolved through negotiated settlements between the injured party and the party at fault (and that party’s liability insurance company.) Generally, settlements address compensatory damages, and the process of negotiating them focuses on the appropriate amounts of economic and non-economic damages an injured party deserves. These figures can be proven by showing receipts, bills, and invoices, or consulting with experts like doctors or economists who may estimate future expenses a victim will be dealing with. Punitive damages, on the other hand, are rarely directly addressed in settlements. At-fault parties tend to resist paying punitive damages as part of a settlement. Nevertheless, a skilled personal injury lawyer can often convince defense lawyers and insurance companies that a case warrants a larger out-of-court settlement because their client could face significant punitive damages if a case proceeds to trial to be decided by a judge or jury.

Does Texas Allow Punitive Damages?

Yes, it is possible to recover punitive damages in a personal injury case in Texas. However, Texas law also imposes limits on punitive damages. These limits are discussed below. To start, Texas law limits awards of punitive/exemplary damages to cases in which the harm an individual suffers results from fraud, malice, or gross negligence. This strictly limits the types of cases in which you can seek punitive damages. Harm resulting from ordinary carelessness or mistake, which forms the basis of most personal injury cases, does not allow the injured party to seek punitive damages. Texas law also sets a relatively high bar for proving entitlement to punitive damages. The injured party must prove their case warrants punitive damages by providing clear and convincing evidence, rather than by a preponderance of the evidence (which is the standard for proving liability for compensatory damages.) In addition, if a jury decides to award punitive damages, then it must do so unanimously. Finally, Texas law limits the size of punitive damage awards in many cases to whichever is larger:

• $200,000, or
• Two times the amount of economic damages, plus an amount equal to any noneconomic damages found by the jury, not to exceed $750,000.

These punitive damage caps do not apply, however, in cases of injury caused by a violent crime or by certain specific acts of fraud or deception.

How Do Personal Injury Attorneys Know When to Seek Punitive Damages?

Deciding whether to seek punitive damages often involves a judgment call on the part of the personal injury attorney representing the injured individual. The attorney evaluates the facts and circumstances that led to a client’s injury and compares them to other cases the attorney has handled and/or that courts have decided. In Texas, the attorney’s assessment of whether it is possible to prove fraud, malice, or gross negligence with clear and convincing evidence ranks especially high on the list of considerations. In cases that represent a close call, attorneys also assess how seeking punitive damages may affect how judges, jurors, defense lawyers, or insurance companies view the claim. Sometimes, demanding punitive damages makes those parties sit up and pay attention. Other times, however, it may backfire and make them dismiss the case as frivolous. Additionally, in some instances, a statute may expressly authorize a person injured in a particular way, by a particular act, to seek punitive damages. Attorneys will also take those laws into account in deciding whether to recommend that a client request punitive damages. Keep in mind that this decision-making usually only happens in connection with seeking punitive damages, not compensatory damages. Virtually all personal injury cases seek compensatory damages. Personal injury attorneys rarely (if ever) have to evaluate whether to seek them or not. Instead, when it comes to compensatory damages, they focus their attention on identifying all the harm their clients have suffered and calculating the damages that would constitute appropriate compensation.

How Do Attorneys Calculate the Total Amount of Compensatory and Punitive Damages to Seek?

Early on in a case, personal injury lawyers often focus their energy on developing a reasonable estimate of the amount of compensatory and (when appropriate) punitive damages a client can seek. This is an important step as it helps attorneys set reasonable expectations with their clients. Sometimes, parties at-fault and their insurers make early settlement offers that require an informed evaluation by personal injury lawyers. You never want to settle for less than you deserve! Attorneys calculate economic compensatory damages by collecting and tallying all expenses and lost wages their clients have incurred thus far because of an injury, and by evaluating (sometimes with the help of medical and financial experts) the likely future costs their clients will face in the future. They calculate non-economic compensatory damages by working with their clients to understand the full scope of difficulties and challenges the injuries have caused, and then translating those harms into a dollar amount that falls within a range of what the attorneys have seen paid to victims in similar cases. Finally, if they determine a case warrants seeking punitive damages, they engage in an exercise similar to what they do for calculating non-economic damages: the attorney compares the nature of the conduct that led to their clients’ injuries to other cases and decides on a realistic range of punitive damages.

What Should You Do If You Are Injured in an Accident?

Unexpected injuries can turn your life upside down, saddling you with medical expenses, mountains of debt, and a wide array of physical and emotional challenges. You deserve to receive compensatory and, potentially, punitive damages for those difficulties. A skilled lawyer can help you get them. Contact a skilled personal injury attorney as soon as possible after getting hurt in any accident or incident. You may have a limited amount of time to take legal action—two years, or even less, in most Texas personal injury cases. Missing a deadline for taking action could cost you valuable legal rights, so act now.