Module 6: Damages

Tort law aims to compensate victims for the actual expenses incurred in connection with losses and injuries suffered due to the tortious conduct of others. The idea is compensatory in nature, but also aimed at achieving fairness and efficiency through risk allocation, loss distribution and identifying “deep pockets” (who can best pay and/or internalize the costs). While damages undoubtedly deter unreasonable behavior to some extent, the force of deterrence may be different in the civil law context of torts. In the criminal context, by contrast, unsuccessful defendants may face financial penalties but also risk social judgment, severe impact on employment prospects, potential loss of voting rights and of course loss of liberty through imprisonment. In tort law, the deterring factors are different and arguably weaker; it is the fact and size of money damages that is thought to induce fear (or simply caution) on the part of potential tortfeasors.

In some cases, significant reputational harms attach, beyond and discrete from the financial burden imposed by money damages. For instance, the defendant in a professional malpractice case may find that paying a damages award does less harm to their ongoing and future business prospects than the simple fact that their negligent professional conduct has been brought to light. Depending on the industry as well as the extent of the malpractice, the legal ruling could make continued participation in the profession all but impossible. Hence reputational interests may also play a role in bolstering tort law’s rules, apart from the anticipated impact of damages. However, in a great many cases, corporations and businesses treat tort liability as a cost of doing business. Such entities don’t really care how tort liability makes them appear to the public. To invoke (and again paraphrase) Judge Richard Posner’s point, perhaps some accidents aren’t worth the cost of avoiding, or of taking precautions to avoid. Some risk is cheaper to internalize than to prevent. The negligence calculus (or “Hand formula”) covered in Module 3 offers a way to approach determinations of negligence by juxtaposing the costs of taking precautions against the likelihood and severity of harm that will flow if the precautions are not taken. Another way of putting this is that the defendant may have acted reasonably from an economic perspective even when choosing not to take some precautions that would definitely have minimized some injuries.

Finally, in a small number of cases, plaintiffs aren’t seeking money damages, they’re seeking some form of injunctive relief, more like a property remedy. They may wish to stop their neighbor from using part of their land for some objectionable purpose or they may wish to force a company to stop polluting a community’s water source. But in most tort disputes, the remedy at hand is money.

A signal feature of the tort law system is its view that money damages can compensate victims for some amount of their pain and suffering even above and beyond paying for the literal costs of the tortfeasance. Recall from Modules 1 and 2 that tort law barred or restricted recovery for purely emotional harms. Damages for emotional distress have a special character that tracks this historical reluctance. For one thing, such damages are harder to articulate and prove than purely financial losses, which tend to be fairly straightforward to prove. (This is true for past financial losses; projecting future losses can be a good deal more complicated.)

For numerous reasons, courts tend to separate the questions of liability (will this defendant be liable to this plaintiff on account of the defendant’s alleged wrongdoing) distinct from damages (how much will the defendant be required to pay this plaintiff in light of the defendant’s liability). Most trials bifurcate into separate liability and damages phases and, as with so many parts of tort law, the jury plays a significant role in determinations of damages. Even in trials that do not bifurcate, the jury will almost always be given separate verdict forms for the liability and damages verdicts, reflecting the importance of continuing to keep distinct from each other the questions of liability and damages.

Several kinds of damages exist. Nominal damages are largely symbolic and awarded by a judge to clarify parties’ positions or vindicate an interest even where money damages do not attach or additional harms have not been proven (as you saw in Modules 1 and 2 with respect to battery and trespass). The court may order $1 or instruct the losing part to pay court costs, for example (which are much smaller than legal fees; those require a different showing and are infrequently awarded). The purpose of nominal damages is to clarify the parties respective interests and/or show that the defendant committed the tort, which will presumably cause a change in behaviors going forward.

Compensatory damages exist to repay the plaintiff for the expenses they have incurred as a result of the tortfeasor’s conduct. These awards, when made for expenses associated with physical injuries, are not usually treated as taxable income. Instead, they are analogous to a reimbursement of expenses that would not have been incurred but for the defendant’s breach of due care. Such damages are thought to be the best approximation of what the P actually suffered, that is, the means of “making the plaintiff whole again.” Compensatory damages are by far the most common kind of damages encountered in tort litigation.

There are two types of compensatory damages: pecuniary (or financial) and non-pecuniary losses. Pecuniary losses may include damage to property and the costs to repair or replace (as well as costs associated with temporary substitution such as a rental car or home during the pendency of repairs). Pecuniary losses may also include the costs associated with personal injury damages including present and relevant future medical expenses; lost wages and/or future diminished earning capacity as well as any other economic costs associated with the physical injury, including any other economic expenses incurred because of the injury (think of transportation; maybe the plaintiff can no longer drive and will require buses, taxis, or a specially outfitted vehicle). When lost wages are awarded, they are ordinarily taxed in the way that employment compensation would have been. Other exceptions apply and the rules are both complex and liable to change with various tax reforms. However, it can be a helpful dividing line conceptually for students to think of compensatory damages as being the amount that plaintiffs proved they had spent for their suffering or persuaded the trier of fact that their suffering was “worth.” Punitive damages differ in being additional to that baseline amount. All of those pecuniary losses are sometimes called “special damages” and distinguished from “general damages” which are awarded in connection with pain and suffering.

General damages are sometimes harder to quantify but they are not controversial when allocated in connection with physical injury. Some jurisdictions have created statutory caps on damages and those that do may cap general damages in particular. They are associated with potentially arbitrary and excessive awards because they may lack the specific and trackable character of special damages. Note that the defendant’s conduct does not control the amount of the plaintiff’s compensatory damages. The damages are based on the plaintiff’s injury because these damage awards aim to restore the plaintiff to a pre-accident state. In that sense, compensatory damages reflect the commitments underlying the eggshell plaintiff doctrine.

By contrast, punitive damages exist only in extraordinary cases and the plaintiff must prove that the defendant’s conduct was not merely unreasonable (which was established in the liability phase of the trial) but also included something like “malice” or “wanton or willful violence” (the precise standard varies by jurisdiction). These are damages intended to deter and punish egregious conduct. Unlike compensatory damages, punitive damages are taxable by default because they are considered to be extra compensation, beyond the remuneration the plaintiff needs to be whole again. They are sometimes used for amounts that might not otherwise be recoverable such as attorney’s fees or time lost litigating (especially in bitter litigation with a vindictive or trivial aspect to it). Most often awards of punitive damages go straight to the plaintiff. However, in some states, because these awarding of punitive damages is thought to be similar in purpose to criminal punishment and the plaintiff does not need them, awards of punitive damages may go to the state. These damages are always permissive, not mandatory—that is, they are discretionary for the jury and never awarded automatically. In some instances, such as in cases of vicarious liability in claims arising under the FTCA, punitive damages are unavailable.

Questions or Areas of Focus for the Reading

• Are damages truly intended to “make P whole again”? Is this a subjective standard?
• If so, why are juries told to make “fair and reasonable” awards?
• Should the language of “wholeness” be abandoned?
• Where do awards for pain and suffering fit in?
• Should punitive damages be subject to the same or different rules and limitations as compensatory damages?
• Why does the system require proof of harm in some cases, and not others?
• Why does the system take some kinds of harm more seriously than others?
• Are statutory caps on damages (which have been ruled constitutional) undercutting the compensation principle?
• Consider what interests or experiences, if any, strike you as being impossible to remedy through money damages. Is there anything tort law can do to improve a situation in such cases?
• Doctrines provide one level of understanding of tort’s damages scheme. As you read, consider the sociological factors that may play a role in effectuating (or undermining) tort law’s purposes with respect to money damages.