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Compensatory Damages: Definition & Example

Instructor: Jessica Schubert

Jessica is a practicing attorney and has taught law and has a J.D. and LL.M.

After you complete this lesson, you will understand what constitutes compensatory damages. Moreover, you will review several examples in order to obtain a greater understanding of compensatory damages.

Definition

Compensatory damages is a legal term, but one that may be good to know if you're ever seriously injured due to the actions of another person. Let's say, for instance, that your neighbor Bob runs over your foot with a lawnmower, severely injuring you. As a result, you can no longer walk long distances, run on the track team, or drive. The accident has severely impacted your life. You decide to sue Bob, and the judge awards you with compensatory damages. Compensatory damages consist of money which is provided by a judge or a jury to compensate you for your actual losses.

The term 'compensatory damages' is also synonymous with 'actual damages.' Therefore, the amount of money you will receive is limited to the extent of the proven injury you have incurred. There are other types of damages you can receive, but compensatory damages are based upon what you can prove to be the actual loss you have experienced.

Compensatory damages are different than other categories of damages, such as punitive damages, which are those damages designed to punish and deter a party from future wrongdoing.

Examples

One way to gain a greater insight into compensatory damages is to review an example. Let's say that Abby makes cans of stew that she sells to various supermarket chain stores. Bob purchases a can of the stew and discovers a severed finger in the can. Bob files a lawsuit against Abby based upon her negligence in making the stew. Bob's lawsuit is based upon emotional distress. He proves to the court that he can no longer sleep, has missed work, suffers from post traumatic stress disorder and has to see a therapist once a week since finding the finger in the stew. The court determines that Bob has proven these damages. Therefore, the court awards Bob compensatory damages to compensate him for his losses, injuries, and therapy expenses. These are the actual damages Bob has incurred as a result of his experience with the stew.

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