Legal
Damages
Damages are the money awarded to compensate for harm, divided into economic damages such as medical bills and lost wages, non-economic damages such as pain and suffering, and in rare cases punitive damages intended to punish.
Economic damages are documented and calculable. Non-economic damages are argued, and they are usually where the disagreement between the parties actually sits.
Punitive damages require conduct well beyond ordinary negligence and are unavailable in most cases.
Tax treatment differs across the categories, which is worth raising with a tax professional before settlement rather than after.
Related terms
- Liability — Liability is legal responsibility for causing harm, and establishing it is the first requirement of any injury claim — without it, the extent of the injury does not matter.
- Maximum medical improvement — Maximum medical improvement, or MMI, is the point at which an injured person's condition has stabilized and is not expected to improve further with additional treatment.
- Settlement — A settlement is an agreement resolving a claim for an agreed sum, in exchange for which the claimant signs a release permanently giving up the right to pursue it further.
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