What Are Economic Damages [In-Depth Guide]

All road users are required to provide a duty of care, and when that is breached, it can result in accidents and injuries. The affected victim may be given the right to seek compensation for the financial losses incurred by the event. This includes acquiring the total value of their losses through what is referred to as economic damages. 

It is intended to reimburse personal injury victims for measurable or tangible costs. The damages awarded are often paid out as a lump sum, simplifying compensation by addressing economic damages in one amount. Understanding how this can be calculated can help you avoid settling for less than what your case is actually worth.

What Are Economic Damages?

Economic damages are a component of compensatory damages, referring to financial losses a person suffers due to an injury or accident. Such an outcome can be caused by various circumstances, including some of the following:

• Distracted driving
• Road rage
• Drowsy driving
• Speeding
• Slip and falls on hazardous property

It is meant to compensate victims for out-of-pocket expenses along with other monetary losses pertaining to the incident. Since this is based on measurable economic harm, it can be documented and calculated by using receipts, pay stubs, and invoices.

Is There a Time Limit on Economic Damages?

The deadline to recover economic damages will depend on the statute of limitations that applies to your case. These vary state by state. For instance, in California, Arizona and Nevada, most personal injury claims must be filed within two years from the date of when the incident occurred.

However, Washington, on the other hand, gives injury victims three years and failing to meet the statute of limitations can bar you from recovering economic damages, such as medical bills and lost wages, and other available compensation.

Types of Economic Damages

Certain types of economic damages are based on documented costs and are made to reimburse the affected victim for compensation they have lost, or will need to spend, as a direct result of bodily harm. Common examples are covered in the sections below.

Medical Expenses

Medical bills are usually a large portion of economic damages that cover health care services needed to treat an injury, including some of the following:

• Ambulance fees
• Hospitalization
• Diagnostic imaging
• Long-term medical treatment
• Health care providers
• Nursing or household services

Some injuries require ongoing care, meaning that expert testimony may be needed to figure out what the projected cost will be over time.

Lost Wages

If an injury makes you miss work, you may be entitled to compensation for lost income during that period of time. This can include:

• Hourly wages or salary for the number of days missed
• Bonuses that could have been earned
• Overtime pay that may have otherwise been available

Proof of lost wages typically comes from pay stubs or tax returns. Your employer could also confirm on their end the amount of time you missed and your regular compensation.

Loss of Earning Capacity

If your injuries made it practically impossible to continue the same line of work or reduced your ability to earn as much pay as you did prior to the incident, you may be awarded damages for diminished future earning potential. This is common in the following cases:

• Permanent psychological or cognitive limitations
• Inability to fulfill work-related duties as a whole due to physical pain or emotional distress
• A change to a lower-paying job as a result of medical restrictions
• Missed opportunities, promotions, or professional growth

Calculating such losses may require expert analysis from either an economist or vocational expert who can estimate what your future income would be based on your age, medical condition, and experience.

Property Damage

Property damage refers to harm to or loss of tangible personal property caused by an accident, and this typically involves repairing or replacing the damaged items. The most common case includes vehicle damage, but it can also apply to:

• Electronic devices, like cell phones and laptops
• Traveling equipment, including bicycles or motorcycles
• Clothing or accessories
• Work-related items, such as tools or equipment

You may receive reimbursement for the fair market value of the item if it was destroyed, or for repair fees if it is fixable. Documentation, such as receipts, repair estimates, or appraisals are needed to determine what the total will be.

Out-of-Pocket Expenses

These are additional costs that arise directly from your bodily injury. While they may seem minor when assessed individually, they can add up significantly and are recoverable if documented properly. This may include:

• Transportation fees
• Hotel stays
• Childcare expenses
• Home modifications
• Vehicle modifications
• Medical supplies
• Rental vehicles

You will need to maintain records of your receipts, invoices, and other documentation pertaining to these expenses to have them included in your personal injury claim.

What Is the Difference Between Economic Damages and Non-Economic Damages?

While economic damages cover financial losses resulting from an injury, compensation does not stop there. Victims are also given the opportunity to secure non-economic damages. This refers to intangible losses that are not easily measured in dollar value. Some include the following:

• Pain and suffering: This involves discomfort or chronic pain due to injury.
• Emotional distress: Anxiety, depression, and post-traumatic stress disorder (PTSD) can appear shortly after the accident.
• Loss of enjoyment of life: When injuries prevent you from enjoying your daily activities or hobbies you had prior to the collision.
• Disfigurement or physical impairment: This includes scarring, loss of a limb, or other permanent physical changes that can tamper with your appearance or affect your mobility.
• Loss of companionship: The impact the injury made with close relationships, including intimacy, companionship, or affection with a significant other or a family member.
• Mental anguish from permanent disability: The long-term psychological impact of adjusting your lifestyle due to a major injury.

Understanding the distinction between the two types will help illustrate the full extent of what an injured person can be entitled to.

How Do You Prove Economic Damages

To prove economic damages, you will need to show detailed evidence demonstrating the financial expenses you suffered as a direct result of the accident. Courts and insurance companies may require you to prove that your expenses are legitimate and relate to the event. This usually includes the following:

• Medical bills and records: To exhibit the costs of hospital visits and past and future medical care needs.
• Pay stubs or tax returns: To demonstrate lost income or diminished earning capacity.
• Repair estimates or invoices: For property damage, like vehicle repairs.
• Expert testimony: Mostly from doctors or economists when showing future costs or long-term loss of income.

You should also consider acquiring a copy of the police report and surveillance footage as evidence to prove the incident itself and the extent of your injury. 

What If I Was Partially at Fault?

If you were partially at fault for the accident, you may still be entitled to compensation, however, it will be altered according to your percentage of fault. This is handled through comparative negligence, and there are a few main systems used in the United States: 

• Pure comparative negligence: You can still recover damages even if you were mostly responsible for the incident. However, compensation will be reduced based on your percentage of fault. 
• Modified comparative negligence: You may be entitled to recover damages only if you are less than 50% accountable. 

Comparative negligence usually applies during settlement negotiations or trials. Insurance companies will try to direct most of the blame on you to minimize payout, so it is important for you to gather solid evidence and seek legal support to challenge unfair claims made by the opposing side.

Finding an Attorney with the Right Experience

Each type of attorney excels in a different field. Some may have knowledge and expertise in car accident cases whereas others will provide efficient services when handling wrongful death claims. These scenarios involve unique circumstances that will require help from someone who has the experience needed to deliver satisfactory results. Be sure to carefully assess your options and go with someone who you believe would be an excellent lawyer that will handle your situation with the utmost level of care and competence.

How to Calculate Economic Damages

To calculate economic loss, total all your financial expenses pertaining to the injury. This includes:

• Lost wages
• Reduced earning capacity
• Future medical expenses
• Property damage repair or replacement fees
• Any other out-of-pocket expenses, such as in-home care or transportation

Adding these up will help you learn what amount of economic damages you can pursue to recover compensation. You can also input your losses into our personal injury settlement calculator to reveal the estimated value of your case.

Are Economic Damages Calculated Differently in Other States?

Economic damages mean the same thing in every state, but the way they are calculated and proven may vary. Each place has its own rules on how measurable financial damages must be documented and assessed in a personal injury lawsuit. 

For instance, some states may require additional detailed proof or expert testimony to support future losses, like reduced earning capacity, whereas others will allow juries more flexibility when it comes to estimating those amounts. 

States may also differ on rules, like insurance offsets or caps, in specific types of cases. Although the concept remains consistent nationwide, the legal process for calculating and proving economic damages will depend on the state.

Is There a Cap on Economic Damages?

In most cases, there is no cap on economic damages since they are intended to cover an injured person for their actual financial losses. However, some states may have exceptions for certain types of claims, meaning rules may vary based on the jurisdiction and circumstances surrounding the case. 

For example, when it comes to claims made against government entities, strict statutory limits may apply. Non-economic damages may also be commonly subject to caps depending on the state and the type of case.

Are Attorney Fees Economic Damages?

Attorney fees are usually not considered economic damages since they are perceived as a cost of litigation, not necessarily a direct loss caused by an injury or wrongdoing. Under the American Rule, each party will have to cover their own legal fees. However, exceptions may apply in which attorney fees can be recovered:

• Contracts that involve fee-shifting provisions
• Statutory authorization 
• Intentional breach of contract
• Constitutional rights cases

Get Legal Support From West Coast Trial Lawyers Today

Recovering economic damages may not be as simple of a task to achieve on your own. You will be required to collect critical documentation pertaining to the financial expenses you sustained  due to the accident. With the help of a qualified attorney, you can improve your chances of a successful outcome. 

At West Coast Trial Lawyers, we will provide the guidance and support needed to help maximize financial recovery. With over 25 years of experience handling personal injury claims, we have recovered more than $1.7 billion in settlements on behalf of our clients. 

To book a FREE consultation, we welcome you to connect with us by calling (213) 927-3700 or completing our quick online contact form.