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What Are Economic Damages?

What Are Economic Damages?

If you’ve been in an accident and suffered personal injury, you’ll need a good estimate of the damages so your attorney can negotiate a reasonable settlement or litigate to obtain a fair jury award for you.

In Massachusetts, there are two general types of damages – compensatory damages and punitive damages.

Types of Economic Damages

Economic Damages

Compensatory damages reimburse the plaintiff with enough compensation to replace what they have lost. The purpose is to put the plaintiff back in the same position they were in before the defendant caused their accident.

Compensatory damages are further divided into these categories:

  • Economic damages, also called specific damages. These are out-of-pocket expenses due to the injury.
  • Non-economic or general damages (such as pain and suffering; or losses of life enjoyment, consortium, or companionship). These damages are not tied to specific monetary costs.

Punitive damages are designed to penalize the defendant for their conduct. These are rare in Massachusetts personal injury law.

Economic damages are quantifiable and are the sum of the losses due to the following:

  • Medical expenses
  • Lost income

Other expenses are reimbursable if they are directly related to the injury.

Calculating Medical Expenses

Medical Expenses

There are three types of medical expenses – past, present, and future. Past and present expenses are easier to quantify because you have documentation of medical bills and procedures.

Future medical needs are harder to calculate. According to Massachusetts law, this calculation must be a “fair and reasonable charge for such services.” Getting the calculation right is critical because you can’t return to court later and ask for more once you settle or receive a judgment award.

To help with these critical calculations, your lawyer may hire a medical expert. This expert will look at many future needs in making a calculation. 

These factors may include:

  • Surgery
  • Prescription medication for pain
  • Physical therapy
  • Lab tests such as blood tests
  • X-rays and MRIs
  • Follow-up visits
  • Wheelchairs, prosthetics, or other assistive devices
  • Assisted living or other types of home health care
  • Counseling

It is crucial to capture the types of future medical expenses you will need. However, it is equally important to account for the consistent increases in the costs of medical care. To help estimate this, the medical expert reviews the anticipated expenses above and takes into account estimated rates of medical inflation. The expert will also consider your age, general state of health before the injury, and medical care quality in your geographic area.

Once the medical expert has arrived at a calculated amount, they discount the rate to reduce costs down to their approximate present value.

Calculating Lost Income

There are three types of lost income – past lost wages, future lost wages, and loss of earning capacity. 

Past Lost Wages

These can be calculated fairly accurately. For example, if you make $4,000 per month and you missed three months of work because of your injury, the past lost wages would be $12,000. 

Of course, the calculations can quickly become more difficult. Maybe you’re self-employed, and your earnings can differ from month to month. Or perhaps you’re an hourly employee, and the monthly overtime you make varies greatly. Nevertheless, a fairly accurate estimate is still usually possible. 

Future Lost Wages and Loss of Earning Capacity

Calculating future losses is more difficult because you have to factor in possible raises and other unknowns. 

The calculation depends on factors such as:

  • Age. Are you 28 in a successful business, or 64 and planning to retire next month?
  • Type of Industry. What’s the state of the industry you work in? Is it declining (like nuclear power operation, travel agencies, or watch repair)? Or does the industry you work in face a bright future (such as software development or the medical field)? Are you self-employed with a successful business model? Maybe you’re starting a business, but the chance of success is 50-50.
  • Promotional Possibilities. Are your promotional chances limited? Or are you in a booming industry ripe with future promotions (like a lawyer on track to be a partner or an app-developer at Google)?
  • Limiting Effect. Is there a permanent component to your injury that will reduce your options above or otherwise limit your earnings potential?

All this guides the calculation of your future lost income or loss of earning capacity.

Past medical bills and lost wages can be calculated with a fair amount of accuracy. However, future medical costs, future lost wages, and loss of earning capacity are much more difficult – and can involve considerable dispute and litigation. So, not only do you need the help of experienced personal injury attorneys, but you also need your attorneys’ help in hiring the right experts to formulate a reasonable estimate of future damages. These experts can be the difference in getting adequate compensation for your economic damages due to another’s negligence.

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