What Are Economic versus Noneconomic Damages?

Understanding Economic and Noneconomic Damages: A Guide

By Philip Glickstein

In the realm of personal injury and medical malpractice law, the terms economic damages and noneconomic damages are frequently encountered. While both types of damages are intended to compensate the injured party, they address different aspects of harm. Understanding the distinction between them is crucial for anyone navigating the legal system, particularly when seeking just compensation for injuries or loss.

Economic Damages: Quantifiable Losses

Economic damages, also known as special damages, are intended to compensate for financial losses that are directly tied to an injury or wrongful death. These damages are objective and quantifiable, meaning they can be calculated with a fair degree of precision based on evidence such as bills, receipts, and wage statements. Common types of economic damages include:

1. Medical Expenses: This includes past and future medical bills related to treatment, rehabilitation, and any ongoing care required due to the injury.

2. Lost Wages: Compensation for income lost as a result of being unable to work, as well as loss of future earning capacity if the injury results in long-term disability.

3. Property Damage: Costs associated with repairing or replacing damaged property, such as a vehicle in a car accident.

4. Out-of-Pocket Expenses: Additional costs directly related to the injury, such as transportation to medical appointments or home modifications to accommodate a disability.

Economic damages are designed to make the injured party financially whole, returning them to the position they would have been in had the injury not occurred.

Noneconomic Damages: Subjective Harms

Noneconomic damages, sometimes referred to as general damages, compensate for the intangible and non-monetary aspects of harm suffered by the injured party. Unlike economic damages, these are subjective and cannot be calculated with the same level of precision. They include:

1. Pain and Suffering: Compensation for the physical pain and emotional distress caused by the injury. This encompasses both past suffering and anticipated future suffering.

2. Emotional Distress: Mental anguish, anxiety, depression, and other emotional impacts resulting from the injury or its consequences.

3. Loss of Consortium: Compensation for the impact of the injury on the plaintiff’s relationship with their spouse or family, including loss of companionship, affection, and sexual relations.

4. Loss of Enjoyment of Life: Damages awarded when the injury prevents the plaintiff from enjoying activities or pleasures they once found fulfilling.

Noneconomic damages are inherently more difficult to quantify because they involve subjective experiences. Courts often rely on factors such as the severity of the injury, the impact on the plaintiff’s daily life, and the testimony of medical professionals and family members to determine an appropriate award.

Key Differences Between Economic and Noneconomic Damages

The primary difference between these two types of damages lies in their nature and calculation:

1. Measurability: Economic damages are concrete and can be measured through documentation, whereas noneconomic damages are abstract and evaluated based on personal experience and impact.

2. Purpose: Economic damages aim to reimburse financial losses, while noneconomic damages seek to provide compensation for the personal and emotional toll of an injury.

3. Limits and Caps: Some states impose caps on noneconomic damages, particularly in medical malpractice cases, to limit the amount a plaintiff can receive for pain and suffering. Economic damages, being more concrete, typically do not face such limitations.

Conclusion

Both economic and noneconomic damages play a vital role in the justice system’s effort to compensate individuals for harm suffered due to the actions or negligence of others. While economic damages address tangible financial losses, noneconomic damages acknowledge the profound and often life-altering impact of injuries on an individual’s quality of life. Understanding these distinctions is essential for anyone involved in a legal claim, whether as a plaintiff, defendant, or legal professional.

By grasping the differences between economic and noneconomic damages, individuals can better navigate the complexities of the legal system and advocate effectively for fair compensation.

From an attorney’s perspective, taking on a case where the plaintiff is barred by statute from recovering noneconomic damages presents significant financial challenges. Attorneys typically work on a contingency fee basis in personal injury and medical malpractice cases, meaning they only get paid if they secure a settlement or judgment for their client. Their fee is usually a percentage of the total recovery, often around 30-40%.

In a typical case where both economic and noneconomic damages are recoverable, the attorney’s fee comes from the total award, which includes compensation for both tangible financial losses (like medical bills and lost wages) and intangible harms (like pain and suffering). This broader base for calculating the attorney’s fee allows for a reasonable distribution between the attorney and the client. However, when noneconomic damages are barred by statute, the compensation available is limited strictly to economic damages.

Let’s break down why this is problematic:

1. Limited Pool of Compensation: When only economic damages are available, the total compensation pool is significantly smaller. This means that the attorney’s fee must come exclusively from this already limited amount. For example, if economic damages are $100,000 and the attorney’s fee is 35%, $35,000 goes to the attorney, leaving the client with $65,000.

2. Inadequate Compensation for the Client: The purpose of economic damages is to reimburse the client for their financial losses, such as medical bills and lost wages. If the attorney’s fee is deducted from this limited amount, the client may not receive enough to cover these costs fully, let alone have anything left to address other aspects of their injury. This creates a scenario where the client is not adequately compensated, even though they have won their case.

3. Conflict of Interest and Professional Ethics: Attorneys have a duty to act in their client’s best interests. Taking a substantial fee from a limited economic damage award can put the attorney in a position where their fee conflicts with the client’s need for financial recovery. If an attorney accepts such a case, they may find themselves in an ethical dilemma, as the client would be left inadequately compensated despite prevailing in their claim.

4. Inability to Justify the Risk and Expense: Personal injury and medical malpractice cases are costly to litigate. Attorneys often advance these costs with the expectation of being reimbursed from the total recovery. Without the possibility of recovering noneconomic damages, the potential recovery may not justify the risk and expense. An attorney could end up spending more on litigation than the potential fee they could earn, making the case financially untenable.

In summary, when a statute bars recovery of noneconomic damages, it leaves attorneys with a limited financial incentive to take the case. Dedicating significant time and resources to a case where their fee would significantly diminish the client’s compensation for actual out-of-pocket expenses is not feasible. This legal restriction effectively denies many potential plaintiffs the opportunity to seek justice, as no attorney can afford to take on their case without compromising either their practice or the client’s financial recovery.