How is the dollar amount in an injury lawsuit decided?

If you win a personal injury lawsuit, the money that is awarded to you will consist of “compensatory damages,” or an amount designed to reimburse you for all the losses that you suffered on account of the accident or other event. In some cases, you may receive additional “punitive damages” that are intended to punish the defendant.

Compensatory damages typically are awarded based on a projection of all past, current, and future financial losses caused by the injury. This includes not only the cost of medical and other treatments, but also the income that you would have received “but for” the injury, including retirement benefits that have been lost. When children are injured, future earning capacity is estimated.

Compensatory damages can also include an estimated dollar valuation placed upon non-financial losses, such as pain and suffering, both physical and emotional, and any significant reduction in your general quality of life.

Damages are generally awarded in a lump sum. Future expenses may be reduced based on the interest that will presumably be earned on the lump sum, or increased to take inflation into account. Some people choose to convert this lump sum into a structured settlement.

In addition to such compensatory damages, “punitive damages” may also be awarded when the court wishes not only to compensate the victim for his or her losses, but also to mete out additional punishment to the defendant because of intentional misconduct, extreme negligence, or similar morally reprehensible behavior.