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How Are Damages Calculated?

how are damages calculated

One of the most common questions that we hear at an initial consultation or early in the case is how much a claim may be worth. While this is a question that takes some work to answer, we can always explain how we come up with a number that you can reasonably expect as damages in personal injury damages. The money that you can receive depends entirely on your circumstances and situation.

Calculating your damages is critical legwork for your claim. Without this key step, you are flying blind. Insurance companies know exactly how to take advantage of claimants who do not know what their claim is worth. There is no requirement that insurance companies must offer you the full value of your claim. They often try to make an initial lowball offer just to see if you will take it, knowing full well that your claim may deserve far more.

Understanding Damages in Personal Injury Cases

Before you file a claim, you need to understand every element of your possible damages and how you arrive at the total of your claim. A personal injury lawyer will explain how these damages work at the beginning of your case. If you have suffered harm from your injuries, you must describe it in detail to your lawyer.

Here is what you need to know about personal injury damages. There are three potential categories of damages in every case, and we will describe each one in more detail below.

The three broad classes of damages are:

  1. Economic damages – this class of damages will pay you for your actual losses due to your personal injury; they are objective and easily provable with paid invoices and bills.
  2. Non-economic damages – intangible losses, such as pain and suffering, resulting from the accident; they are subjective and less susceptible to proof than economic damages.
  3. Punitive damages – in rare cases where the defendant’s conduct is reckless or willful, the jury will award damages to make an example out of the defendant and deter similar conduct. You cannot receive punitive damages in an insurance claim. Only a judge or jury can award them.

All of these will add up to your total award. Both you and the defendant (and their insurance company) will have different views about the appropriate amount of damages in your case. While you want to collect the full and fair value of your claim, the other side wants to save money on their total liability. In some cases, you may end up meeting somewhere between your number and theirs.

Personal Injury Damages Cover Both Past and Future

Personal injury claims are not just a snapshot in time based on your situation but also predict the future costs. The bedrock of your claim is usually the medical records demonstrating the extent of your injuries and your future prognosis. These records will determine how the insurance company or jury views your damages. You may have a completely different view than the insurance company. They will almost always predict a far rosier future for you than your doctor does because it saves them money.

How Economic Damages Work in Your Personal Injury Case

Accidents invariably cause you a financial loss. Even if you are not physically injured, you may suffer some property damages, depending on the type of accident. A core principle of personal injury law is that you must receive compensation for everything you lost and will lose in the future due to the accident.

Economic damages refer to the actual money that comes out of your pocket (or never gets into it) because of the accident.

With that in mind, economic damages include:

  • Lost wages – You will receive compensation for the time you missed from work, including leave that you had to use for doctor’s appointments. If you can only do less work or miss out on a raise because of your injuries, that will also be part of your compensation.
  • Property damage – If you had a property that suffered damage in the accident, such as a car or motorcycle, the defendant must pay for its repair or replacement
  • Medical bills – You must pay all of the costs of your medical care and everything related to it. Your award or settlement should not just include doctor’s bills and hospital fees, but also cover prescriptions, medical equipment, and rehabilitation expenses.

Understanding the Future Before You File a Claim

Calculating your past economic damages is much more straightforward than understanding what you may be due in the future. If you argue that your career progression would have led to raises in the future, you can expect opposition from the insurance company. They want to assume that you will make the same amount of money forever, even though people get promotions and salaries increase.

Before you come up with a dollar amount for your claim, you must understand the future. Even if you assume that you would have gotten a raise in the future, you must also account for the effects of inflation. For decades, this was less of a concern (albeit one you must consider when calculating damages). Now, with the recent burst in rapid and high inflation, this is something that you must once again pay very close attention to in personal injury cases. If you get it wrong, you cannot ask for more money later.

Non-Economic Damages in Your Personal Injury Case

Some damages are far more subjective but for which you must nonetheless establish a monetary value. Not every personal injury victim is in the same position, even if they suffer what is apparently the same injury. For example, an avid runner may sustain a far greater impact from a severely broken leg than someone who does not exercise. An accident victim with anxiety will be in a far worse state of mind than others after their injuries.

The physical effects of your injuries can have many other ramifications in your life. They can keep you from doing things you enjoy or make you depressed and scared. This is not to mention the chronic physical pain that you may feel.

The question is how you can put a dollar value on these injuries. We call these non-economic injuries because they do not automatically come with a dollar value attached. You and your attorney will figure out what you think they should be worth.

Non-economic damages consist of:

  • Physical pain and suffering
  • Loss of enjoyment of activities
  • Mental anguish
  • Inconvenience
  • Loss of consortium or companionship
  • Loss of earning capacity
  • Humiliation
  • Permanent scarring

Non-Economic Damages Are Subjective and Can Be Substantial

Non-economic damages can form a significant percentage of your award. However, the insurance company will always trivialize your suffering so they can pay you less. They will try to apply an objective multiplier to your medical bills to calculate a generic sum, overlooking exactly how you have suffered.

Your attorneys will value your non-economic damages based on your own particular experience. They will consider your unique circumstances in putting a number to your damages. It is here where you will most likely end up in conflict with the insurance company.

Just as with economic damages, non-economic damages also pay you for what you will endure in the future. If your injuries are permanent or will last for a long time, you must consider that in your compensation demand. Of course, it is difficult to predict what you may go through in the future because of your injuries.

Punitive Damages Are Rare But Can Be Significant

When it comes to punitive damages, these are not something that you should consider in evaluating your case. In your complaint, you may request punitive damages, but the judge or jury will decide whether you are entitled to them and, if so, how much. Your punitive damages will depend on exactly how big a jury wants to send a message and how hard to punish the defendant. In reality, punitive damages have little to do with you and everything to do with what the defendant did. Nonetheless, you are the one who benefits from the harsh message that juries sometimes send.

Some states limit punitive damages, while others don’t.

However, the Supreme Court has waded into the discussions, and its general rule is that punitive damages cannot be more than ten times the recovery for compensatory damages. Judges will often knock down the value of punitive damages on their own, or an appeals court can reduce the verdict. Many may still award some punitive damages to the plaintiff.

How Having an Attorney Helps Maximize Your Personal Injury Recovery

To calculate your damages correctly, work with an experienced attorney with a strong track record of handling cases like yours. On your own, you will probably have no idea how much your case might be worth. Handling your own case only has downsides to it. An attorney knows how much your case is worth, practically as well as the insurance company.

To calculate your personal injury damages, an experienced lawyer can:

  • Review your circumstances to learn more about your situation.
  • Consider their experience and the value of similar cases.
  • Work with experts who can calculate the value for individual parts of your case.

Necessary Experts in High-Dollar Value Personal Injury Cases

Here are some of the experts your lawyer may work with for complex cases that have potentially high damage amounts:

  • Medical experts who can give an opinion of what your future may hold with your injuries and what care you may need
  • Vocational experts can testify about the trajectory of your career had you not been injured, given your skills and training.
  • Educational experts when your child has suffered a long-term and permanent injury
  • Psychological experts who explain exactly the cognitive and emotional effects of your injuries
  • Lifecare planners who explain what help you might need and how much it will cost
  • Economic experts who estimate future inflation, both in the economy as a whole and for the particular financial aspects of your damages, such as medical costs and lost wages

You Only Have One Chance to Get Fair Personal Injury Compensation

Car Accident Lawyer, Dave Abels
Dave Abels, personal injury Lawyer

Of course, cases with lower damages will be easier to calculate damages. When you are dealing with high dollar value claims, there is more room for error. Do not be drawn in by a large check. Many zeros on the check are not a good thing if there aren’t enough of them. Personal injury settlements pay you money that you need, both now and in the future. Insurance companies specialize in offering what you may think is a great deal right now, knowing full well that they may be short-changing you in the future.

Settling your claim for too little may mean that only the doctors get paid and not you (medical providers have the right to be paid back for the services that they provide). Pay attention to every single element of your damages. Also, make sure to take the time to get a proper estimate of the value of your claim. Too many people let the insurance company rush them into a settlement before they know what their claim is worth.

The insurance company will dangle much-needed money out there, knowing that some people may be desperate and jump at it. Having an experienced lawyer will keep you from making that mistake. You will know how much you legally deserve before you file your claim, and your attorney will stand up and fight for your legal rights.


Abels & Annes
100 N LaSalle St #1710
Chicago, IL 60602
(312) 924-7575

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