Compensatory Damages: Definition, Types, and Examples

What Are Compensatory Damages?

Compensatory damages are money awarded to an injured party that compensate for damages, injury, or another incurred loss. Compensatory damages are awarded in civil court cases where loss has occurred as a result of the negligence or unlawful conduct of another party.

To receive compensatory damages, the plaintiff has to prove that a loss occurred and that it was attributable to the defendant. The plaintiff must also be able to quantify the amount of loss in the eyes of the jury or judge.

Actual damages are intended to provide the monetary amount necessary to replace what was lost and nothing more. Usually, compensatory damages are awarded in civil court cases in order to compensate for damages, injury, or another incurred loss. As we'll explore further in the article, they are different from punitive and treble damages.

Examples of Actual Compensatory Damages

• Medical and hospital bills
• Medical treatments
• Rehabilitation expenses
• Physical therapy
• Ambulance expenses
• Medicine and Prescription drugs
• Nursing home care
• Domestic services
• Medical equipment
• Lost wages or lost employment income
• Increased living expenses
• Property replacement or repair
• Transportation

To be awarded actual compensatory damages, the plaintiff must prove that losses suffered equate to a defined monetary value. 

Examples of General Compensatory Damages

General compensatory damages, meanwhile, include estimates of loss not involving actual monetary expenditure. Some courts use the "multiplier method," which calculates general damages by multiplying the sum total of one's actual damages by a number that signifies the seriousness of the injury.

In other jurisdictions, courts will use the "per diem" method, which attaches a dollar value to each day a plaintiff suffers and adds the value of all those days together. In some cases, a court will use a hybrid of these two methods to calculate general compensatory damages. These general compensatory damages include:

• Mental anguish
• Disfigurement
• Future medical expenses
• Future lost wages
• Long-term physical pain and suffering
• Loss of consortium
• Inconvenience
• Loss of enjoyment of life
• Loss of opportunity

Compensatory damages are typically awarded in medical malpractice lawsuits, usually for medical bills, hospital bills, rehabilitation expenses, and compensation for lost earnings. Some compensatory damages can be difficult to assess. For example, the value of lost wages will be much higher for a more affluent member of society versus someone who is poor or retired.

What Is the Difference Between Compensatory Damages and Punitive Damages?

Compensatory damages differ from punitive damages, which may compensate over and above any loss or damage incurred and are meant to provide an incentive against repeating the act that caused the plaintiff's loss or damages. 

Cases related to compensatory and punitive damages are a major source of debate in the field of health insurance, as proponents of tort reform claim that excessive damages above the actual loss incurred can increase the overall cost of healthcare.

Compensatory damages are intended to compensate the plaintiff of a lawsuit with enough money to cover the loss caused by the defendant.

What Is the Difference Between Compensatory Damages and Treble Damages?

Treble damages are also a kind of punitive damage, meant to dissuade others from committing the same offense. Often, treble damages — which indicate that a statute exists to award a plaintiff up to three times actual or compensatory damages — are invoked when a defendant has purposefully or willfully violated a law.

The Bottom Line

To receive compensatory damages, the plaintiff has to prove that a loss occurred. Compensatory damages, as the name implies, hope to "compensate" for any damages, whether physical, emotional, or mental. They are not to be confused with punitive or treble damages.

Correction—July 30, 2023: This article previously stated that treble damages are invoked when a plaintiff has purposely or willfully violated a law. It has been corrected to read that damages are invoked when a defendant has purposely or willfully violated a law.