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 refer 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.

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

This usually involves repairing or replacing personal property damage in a collision. 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. 

Is There a Time Limit on Economic Damages?

There is a time limit on economic damages, and it is governed by the statute of limitations. In California, most personal injury cases will need to be filed within two years from the date of the injury. If you miss the deadline, you will no longer be given the opportunity to recover damages, regardless of the severity of your financial losses.

Some exceptions, however, may apply. For example, if the injury was not discovered immediately after, the clock may begin on the initial “discovery date.” If the claim is made toward a government entity, you will need to file an administrative claim within six months.

It is important for injury victims to act quickly. Acquiring evidence pertaining to financial losses may be challenging to document if you delay the process.

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 known as pure comparative negligence.

Under this legal system, your pay will be adjusted based on your share of the blame. For instance, if you endured $100,000 in damages, but were found to be only 30% at fault, you will still be eligible to receive $70,000.

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.

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 can be calculated slightly differently in other states, including Arizona, Nevada, and Washington. However, the underlying principle will stay the same, which is to compensate for tangible losses caused by an accident or injury.

Arizona

In Arizona, economic damages are calculated when adding up all financial losses caused by the injury. This includes past and future medical expenses, lost wages, and property damage. To prove economic damages, victims will need to gather documentation, specifically medical bills, pay stubs, and repair estimates. Arizona does not impose any caps on economic nor non-economic damages, giving injured victims the opportunity to recover full compensation for losses incurred in an accident.

Like California, Arizona follows the pure comparative negligence rule, meaning that compensation may be adjusted based on their percentage of fault. But, they can still acquire damages even if they are mostly accountable for the incident. 

Nevada

In Nevada, economic damages are based on all financial losses caused by an injury, including medical bills, lost wages, and property damage. There is no set formula, but proper documentation is needed to help support your claim. Nevada does not have caps set in place for economic damages when it comes to personal injury cases.

The state follows a modified comparative negligence rule. If the plaintiff is more than 50% at fault, they are unable to recover damages. Otherwise, they will receive adjusted compensation based on their percentage of fault, specifically if they are less than 50% liable. 

Washington

In Washington, economic damages are added by adding up all financial losses related to the injury, like past and future medical costs, lost income, and property damage. Victims will need to provide documentation to support their claims, like insurance statements, receipts, and pay stubs. The state does not impose caps on economic damages for personal injury cases.

Similarly to California and Arizona, Washington also complies with pure comparative negligence laws, meaning that compensation will be reduced according to the degree of fault committed.

Is There a Cap on Economic Damages?

In California, there is no cap on economic damages when it comes to personal injury claims. This means that injured parties can recover full financial compensation, like medical bills or lost income, just as long as losses are supported by credible evidence. However, non-economic damages may be capped for medical malpractice cases, which for 2025 is:

• $430,000 for non-death cases
• $600,000 for wrongful death cases

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 20 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.