Key Takeaways
- Economic damages refer to financial losses caused by an injury, including medical expenses, lost income, and future financial losses.
- Calculating economic damages can involve documenting past losses, future medical needs, and diminished earning capacity.
- Common categories of economic damages include medical expenses, lost wages, property damage, and other injury-related costs.
- A personal injury attorney can help assess and document economic damages to ensure proper compensation under the law.
- It’s crucial to evaluate future economic damages before settling a personal injury claim, as they can substantially affect overall compensation.
Estimated reading time: 12 minutes
Economic damages are the financial losses caused by an injury or other legally compensable harm. Unlike damages for pain, emotional suffering, or loss of enjoyment of life, economic damages involve losses that can generally be measured in monetary terms.
Examples may include medical expenses, lost income, diminished earning capacity, property damage, and the cost of future medical care.
Economic damages can include past losses that have already occurred as well as future financial losses that are reasonably expected to result from an injury.
Although some economic damages are relatively straightforward to document, others can be complicated. A hospital bill or missed paycheck may provide a specific dollar amount, while future medical expenses or diminished earning capacity may require medical, vocational, or economic analysis.
A personal injury attorney can help identify, document, and calculate the economic damages potentially available under the law governing your claim.
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What are Economic Damages?
Economic damages are a form of compensatory damages intended to compensate an injured person for financial losses resulting from another party’s legally actionable conduct.
They can arise in many types of cases, including:
- Auto accidents;
- Truck accidents;
- Premise liability cases;
- Product liability cases;
- Medical malpractice claims;
- Wrongful death cases; and
- Other personal injury matters.
Economic damages are sometimes called pecuniary damages because they represent losses that can be expressed financially.
However, that does not mean every economic loss has a simple or fixed dollar value.
Past losses can often be documented using bills, receipts, payroll records, and invoices. Future losses may require expert testimony and projections concerning medical needs, employment, earning capacity, inflation, work-life expectancy, and other factors.
The economic damages available in any particular case depend upon the facts and applicable state law.
Common Types of Economic Damages
Economic damages can take many forms. The following are among the most common categories in personal injury cases.
Medical Expenses
Medical expenses are one of the most common forms of economic damages.
Depending upon the injury and applicable law, recoverable medical expenses may potentially include:
- Emergency room treatment;
- Hospitalization;
- Physician visits;
- Surgery;
- Physical therapy;
- Diagnostic testing, including X-rays, MRIs, and CT scans;
- Prescription medications;
- Mental health treatment;
- Rehabilitation;
- Specialist care;
- Medical equipment; and
- Other reasonable and necessary medical treatment related to the injury.
An injured person generally must establish a connection between the medical treatment and the accident or event giving rise to the claim.
For example, if a person receives treatment for an unrelated medical condition after an automobile accident, that treatment does not automatically become part of the accident claim merely because it occurred after the collision.
Medical causation can become especially important when the injured person had a pre-existing condition.
An accident may aggravate or worsen a pre-existing condition, and the additional harm may be compensable depending upon applicable law. Medical records and physician opinions can become important in distinguishing pre-existing problems from injuries or aggravations caused by the accident.
Future Medical Expenses
Economic damages may also include the reasonable cost of medical care expected to become necessary in the future.
Examples may include:
- Future surgeries;
- Continued physical therapy;
- Long-term medication;
- Follow-up treatment;
- Prosthetic devices;
- In-home nursing care;
- Rehabilitation;
- Medical equipment; and
- Long-term or lifetime care.
Future medical expenses are different from bills that have already been incurred because the treatment has not yet occurred.
As a result, future medical damages generally require evidence establishing that the treatment is reasonably expected to be necessary and providing a sufficient basis for estimating its cost under applicable law.
Serious or catastrophic injury cases may involve physicians, rehabilitation specialists, economists, or life-care planners to evaluate future needs.
Lost Wages and Lost Income
An injury can prevent someone from working for days, weeks, months, or longer.
Lost wages generally refer to income the injured person would have earned during the period in which the injury prevented that person from working.
Evidence of lost income may include:
- Pay stubs;
- W-2 forms;
- Tax returns;
- Employer wage verification;
- Attendance records;
- Documentation of missed work;
- Commission or bonus records; and
- Medical documentation supporting the inability to work.
Self-employed individuals may need additional evidence, such as business tax returns, profit-and-loss statements, invoices, contracts, appointment records, or other business documents demonstrating lost income.
The treatment of sick leave, vacation time, and paid time off used during recovery varies by jurisdiction and circumstances. The fact that an employee used paid leave does not create a single nationwide rule concerning recoverable damages.
Loss of Earning Capacity
Lost wages and loss of earning capacity are not the same thing.
Lost wages generally concern income that has already been lost because an injured person could not work.
Loss of earning capacity concerns the effect an injury may have on the person’s ability to earn income in the future.
For example, an injured person may return to work and initially earn the same salary but still have diminished earning capacity if the injury prevents that person from:
- Working overtime;
- Performing physically demanding duties;
- Advancing into higher-paying positions;
- Continuing in the same occupation;
- Working the same number of hours;
- Remaining in the workforce for the same number of years; or
- Pursuing employment opportunities that were available before the injury.
Factors that may be relevant to calculating diminished earning capacity include:
- Age;
- Education;
- Occupation;
- Employment history;
- Pre-injury earnings;
- Skills and training;
- Nature and duration of the injury;
- Physical or cognitive limitations;
- Expected career progression;
- Work-life expectancy; and
- Future earning potential.
A permanent injury is not necessarily required in every jurisdiction or circumstance, but the claimed loss must be supported by sufficient evidence.
This can become particularly important with injuries whose long-term consequences may be difficult to predict, such as a traumatic brain injury.
Vocational experts and economists may sometimes be used to evaluate the effect of an injury on future employment and earning capacity.
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Property Damage
Economic damages may also include losses involving damaged or destroyed property.
After an automobile accident, for example, property-related damages may potentially include:
- Reasonable repair costs;
- Replacement value when appropriate;
- Towing and storage expenses;
- Loss of use or rental expenses; and
- Diminished value where recoverable under applicable law.
Diminished value can become important when a vehicle has been repaired but is worth less because it now has an accident history.
The proper measure of property damages varies by state and by the type and extent of the loss
Other Injury-Related Expenses
An injury can create financial losses extending well beyond medical bills and missed paychecks.
Other potential economic damages may include reasonable and necessary expenses for:
- Transportation to and from medical treatment;
- In-home nursing or attendant care;
- Assistance with bathing, dressing, feeding, or other activities of daily living;
- Wheelchairs and other medical equipment;
- Home modifications;
- Vehicle modifications;
- Replacement household services;
- Childcare necessitated by the injury; and
- Other documented out-of-pocket expenses caused by the injury.
Whether a particular expense is recoverable depends upon causation, necessity, supporting evidence, and applicable state law.
For that reason, injured individuals should consider keeping receipts, invoices, bills, mileage records, and other documentation of expenses associated with the injury.
How Are Economic Damages Proven?
Economic damages should generally be supported by evidence rather than estimates or assumptions.
Depending upon the type of loss, evidence may include:
- Medical bills;
- Medical records;
- Pharmacy records;
- Receipts and invoices;
- Pay stubs;
- Tax returns;
- Employer statements;
- Business financial records;
- Vehicle repair estimates;
- Property valuations;
- Expert medical opinions;
- Vocational evaluations;
- Economic analysis; and
- Life-care plans.
Past economic damages can sometimes be calculated primarily from existing records.
Future economic damages can be more complicated because they involve events that have not yet occurred.
For example, a physician may provide evidence concerning future medical treatment, while a life-care planner may estimate the cost of long-term care. A vocational expert may evaluate employment limitations, and an economist may calculate the financial effect of reduced earning capacity over time.
The type of evidence required depends upon the claim and the law of the jurisdiction.
Example of Economic Damages
Consider a hypothetical person seriously injured in an automobile accident.
The claimed economic losses might include:
Past medical expenses: $35,000
Past lost income: $12,000
Future medical care: $25,000
Loss of future earning capacity: $40,000
Property damage and related losses: $8,000
Past lost income: $12,000
Future medical care: $25,000
Loss of future earning capacity: $40,000
Property damage and related losses: $8,000
Total claimed economic damages: $120,000
This does not mean the person will automatically recover $120,000.
Each category must be supported by appropriate evidence, legally attributable to the accident, and recoverable under applicable law.
Insurance coverage, comparative fault, evidentiary rules, applicable damage limitations, disputes concerning medical causation, and other factors can affect the ultimate recovery.
Are Medical Bills Always Recoverable at Their Full Amount?
Not necessarily.
The amount appearing on a medical bill is not always identical to the amount that can ultimately be presented to a jury or recovered as economic damages.
For example, a healthcare provider might bill $20,000 for treatment while health insurance pays a negotiated amount and the provider accepts a lower amount in satisfaction of the bill.
The legal treatment of the original billed amount amounts actually paid, contractual write-offs, outstanding balances, and other medical charges varies significantly among states.
Some jurisdictions limit the evidence or recovery associated with particular medical expenses. Others apply different rules.
For that reason, the face value of medical bills should not automatically be treated as the final value of recoverable medical damages.
An attorney familiar with the law governing the claim can determine what medical-expense evidence may be presented and what amounts may potentially be recovered.
Collateral Source Rule and Economic Damages
The collateral source rule addresses how compensation received from a source independent of the defendant may affect a personal injury claim.
Traditionally, the rule generally prevented a defendant from reducing damages simply because the injured person received compensation from an independent source, such as certain insurance benefits.
For example, the fact that an injured person’s health insurance paid medical expenses did not necessarily allow the person who caused the injury to escape responsibility for those damages.
However, there is no single collateral-source rule that applies identically throughout the United States.
Many states have modified the traditional rule by statute or court decision, particularly regarding medical expenses and what evidence can be presented to a jury.
It is also important to distinguish the collateral source rule from subrogation, reimbursement, and liens.
Collateral Sources, Subrogation, and Liens Are Different
These concepts are related, but they address different questions.
Collateral Sources
A collateral-source rule concerns whether compensation received from another source affects the damages recoverable from the defendant or what evidence may be presented concerning those payments.
Subrogation`
Subrogation may allow an insurance company that paid certain expenses to seek reimbursement from the person legally responsible for the loss or from proceeds recovered by the insured.
For example, your automobile insurer may pay for vehicle repairs under collision coverage and later pursue the responsible driver or insurer for reimbursement.
Liens and Reimbursement Claims
Certain entities may have rights to reimbursement from a personal injury settlement or judgment.
Depending upon the circumstances, these may include:
- Health insurers;
- Medicare;
- Medicaid;
- Medical providers;
- Government benefit programs; or
- Other entities with legally enforceable reimbursement rights.
Therefore, the fact that an expense was initially paid by insurance does not necessarily mean that the issue disappears from the personal injury case.
The applicable collateral-source, subrogation, and reimbursement rules depend heavily upon state and federal law.
Economic Damages vs. Non-Economic Damages
Economic damages compensate for financial losses.
Non-economic damages compensate for losses that do not have a direct market price or invoice attached to them.
Depending upon applicable law, non-economic damages may include:
- Physical pain and suffering;
- Emotional distress;
- Mental anguish;
- Loss of enjoyment of life;
- Disability or physical impairment; and
- Loss of consortium.
For example, the cost of surgery may constitute an economic damage, while the physical pain associated with the injury and surgery may constitute a non-economic damage.
Both can be important components of a personal injury claim.
What About Punitive Damages?
Punitive damages are different from both economic and non-economic compensatory damages.
Their primary purpose is generally not to compensate the injured person for a financial or personal loss.
Instead, punitive damages may be available in certain cases involving particularly serious misconduct and are generally intended to punish and deter wrongful conduct.
The legal standard for punitive damages varies substantially by state, and many jurisdictions impose special procedural requirements or limitations on these claims.
Punitive damages are therefore not available simply because someone was negligent or caused an injury.
Why Is Calculating Economic Damages Important?
Failing to identify the full extent of economic losses can result in substantially undervaluing a personal injury claim.
This is especially important with serious injuries.
A person may know what has already been spent on medical treatment but may not yet know:
- Whether additional surgery will be required;
- How long rehabilitation will continue;
- Whether the person can return to the same occupation;
- Whether future earnings will be reduced;
- Whether long-term assistance will be necessary; or
- How much future care will cost.
Once a personal injury claim is fully and finally settled, the injured person generally cannot return later and demand additional compensation simply because future losses turned out to be greater than anticipated.
For that reason, evaluating future economic damages before resolving a serious injury claim can be extremely important.
Value Your Economic Damages with a Personal Injury Attorney
Calculating economic damages involves more than adding medical bills and missed paychecks.
A serious personal injury claim may require evaluating future medical care, diminished earning capacity, property losses, household assistance, insurance payments, liens, reimbursement rights, and other financial consequences of an injury.
A personal injury attorney can evaluate the available evidence, identify potentially recoverable economic losses, and determine whether expert assistance may be appropriate.
Many personal injury attorneys work under contingency fee agreements. Under a contingency arrangement, the attorney generally receives an agreed percentage of compensation recovered for the client rather than charging an attorney’s fee upfront.
If there is no recovery, the attorney generally does not receive a contingency fee. However, attorney’s fees and case costs are different, and responsibility for litigation expenses depends upon the fee agreement and applicable law.
Personal injury claims are also subject to statutes of limitations and other filing deadlines, which vary by jurisdiction and type of claim.
LegalASAP works with a network of law firms throughout the United States. If you were injured and need assistance determining the economic damages potentially available in your case, LegalASAP can help connect you with a personal injury attorney familiar with the laws of your jurisdiction.
If you are ready to see whether you qualify for a personal injury claim, fill out this short evaluation form or click the button below:
When people seek legal representation, they are often facing one of the most difficult moments of their lives. Whether they have been seriously injured, are struggling with overwhelming debt, or are fighting to protect a business they spent years building, they need more than legal advice. They need an attorney they can trust. For Juan Carlos Burgos, that trust is earned through preparation, honesty, accessibility, and an unwavering commitment to every client he represents. In 2003, he became co-owner and President of B.M.R. Medical Group, a successful medical practice dedicated to treating individuals injured in automobile accidents and other personal injuries. Juan then earned his Juris Doctor from Florida A&M University College of Law in 2009. In September 2010, he founded The Law Offices of Juan C. Burgos, P.L., with one guiding mission: To provide exceptional legal representation while treating every client with honesty, compassion, professionalism, and respect. Today, he represents individuals, families, and businesses throughout Florida in matters involving personal injury, business litigation, Chapter 11 business reorganizations, Chapter 13 reorganizations, and Chapter 7 bankruptcy.
