The difference between economic and non-economic damages in civil cases
Photo by cottonbro studio
Picture This: You’re injured due to someone else’s negligence.
Life as you know it is suddenly altered. There’s pain, trauma, hardship. Often times, mounting bills follow, too.
Then you have to learn about the legal side of your ordeal. All of a sudden you’re hearing words like “damages” and “economic losses” and “non-economic losses” like “pain and suffering.” Pretty soon it can start to feel overwhelming…
But here’s the thing…
Understanding economic vs. non-economic damages can literally impact how much money you end up walking away with. And if you have — or are considering hiring — a personal injury lawyer, knowing the difference is one of the most important concepts to wrap your head around as soon as possible.
Here’s everything you need to know:
- What are economic damages?
- What are non-economic damages?
- How courts determine each
- Why this difference is crucial to your case
- Biggest mistakes victims make with damages
What are economic damages?
Economic damages represent monetary losses due to the injury.
These are costs that can easily be calculated. Lost wages. Medical expenses. Property damage. Stuff that shows up in your bank account as bills you’re now paying on behalf of the person who hurt you.
There’s a lot that falls into this category. Here are some common examples:
- Current medical bills (hospital stays, surgery, rehabilitation, medications, equipment, etc.)
- Future medical expenses if the injury requires ongoing care
- Lost income from time missed at work
- Diminished earning capacity if injuries prevent return to same career
- Repair or replacement of damaged property (cars, homes, clothing)
- Any out of pocket expenses caused directly by the injury
You’ll notice a trend here. Economic damages are easier to calculate because there’s proof. A hospital bill isn’t going to change. Loss of income can be proved with past tax returns and expert testimony. This is why economic damages often serve as the foundation of your entire case.
What are non-economic damages?
As you might’ve guessed, non-economic damages are the complete opposite.
These are injuries that don’t come with a dollar amount attached. Pain. Suffering. Loss of enjoyment of life. After a serious accident, it’s likely you’ll experience each of these to some degree. They don’t appear on a bill. But they are very real.
Consider this…
Judges and juries have to come up with a dollar amount for these injuries. They have to use complex arguments and tons of evidence to put an actual dollar figure on these injuries. That’s why having a knowledgeable personal injury lawyer on your side can make all the difference to your personal injury settlements.
Here are some examples of non-economic damages:
- Pain and suffering
- Emotional distress
- Loss of consortium
- Disfigurement/scarring
- Loss of enjoyment of activities
- Mental anguish
When it comes to serious injuries, non-economic damages can and often do exceed economic damages. They’re also arguably some of the most subjective injuries you’ll find in these types of cases.
How courts calculate economic and non-economic damages
As mentioned, economic damages are pretty straightforward. Judges, juries, and insurance companies use bills, expert testimony from doctors/therapists, and employment records to put an actual dollar figure on economic damages.
Non-economic damages require a different approach.
Courts have come up with a couple methods to calculate these losses.
Let’s go through them both.
Method 1: Multiplier
Total economic damages are multiplied by a number (usually between 1.5x and 5x) based on the severity of the injury.
For example, someone who broke their leg in a car accident may only receive a multiplier of 2.0 to 3.0. However, if someone is catastically injured and suffers a permanent injury, the judge or jury will likely use a number at the higher end of that range.
Method 2: Per Diem
The per diem method requires placing a daily dollar amount on the pain and suffering you’ve endured.
So maybe $200 per day is fair. That daily rate is then multiplied by the number of days the victim has been affected by — and will continue to be affected by — the injury.
The tricky part with both of these methods is proving how many days you will continue to suffer.
Judges and juries have to decide if your injuries are permanent. And they use medical records and expert testimony to determine this.
Don’t Forget…
According to one source, only about 4–5% of personal injury lawsuits make it to trial. Insurance companies and opposing counsel would prefer to settle rather than take their chances with a jury.
That means knowing how to calculate each of these damage types is more important than ever. Negotiating a fair settlement requires both parties to have a firm grasp on what your case is actually worth — and that doesn’t happen overnight.
Keep in mind, too, that we’re talking about big money. For one category alone, motor vehicle crashes resulted in $513.8 BILLION dollars in overall economic costs in 2023. Yikes.
Why you should care about economic vs. non-economic damages
If you care about maximizing your compensation, you should care about non-economic damages.
Here’s the harsh reality.
Many people (including lawyers) will only focus on the economic side of your case. They’ll outline all the bills you’ve accrued, calculate future medical expenses, total up lost income, etc.
But what happens if someone sues you and only focuses on your economic damages?
Your total compensation will be less than what you’re rightfully owed.
Let’s say someone destroys your ability to play soccer with your kids. Or go hiking every weekend. Or play the guitar.
These are things you enjoyed doing prior to the accident. They may not be able to do them anymore. That needs to be compensated.
Bingo. You just got introduced to non-economic damages.
Keep in mind that some states place caps on non-economic damages. Essentially, this is the maximum amount a victim can receive through a civil lawsuit.
If the jury decides to award more than the state allows, the judge will lower the award to the max amount allowed under state law.
Varies drastically from state to state, so be sure you understand the law if you plan on filing a civil case.
Avoid these mistakes when dealing with damages
It’s all too common for injury victims to low-ball themselves. They think $50,000 is enough compensation. Or $100,000.
And before you know it, they settle for that amount…and realize down the road just how much they’ve left on the table.
Avoid these mistakes at all costs.
- Settling too early. Wait until you know the full extent of your injuries.
- Not calculating future medical treatment.
- Not calculating future lost wages.
- Failing to keep track of how your injury affects you each day.
- Not recognizing the difference between economic and non-economic damages.
Why would you risk losing tens of thousands of dollars? Or even more?
Takeaway: Economic vs. non-economic damages
Economic and non-economic damages make up your total compensation in a civil case.
One represents your monetary losses. The other represents your personal losses.
Both are extremely important. And when building a case, both should be fought for aggressively.
Let’s recap real quick:
- Economic damages = medical bills, lost wages, property damages, etc.
- Non-economic damages = injuries that don’t come with a specific price tag
- Judges and juries use multipliers and/or per diem calculations to award non-economic damages
- Non-economic damage caps are in place in some states
- Hiring a personal injury lawyer ensures you account for every dollar you’re owed
Don’t shortchange yourself. Now that you understand the difference between economic and non-economic damages, you’ll be in a great position to make sure you’re compensated fairly.