A sum of money awarded in a civil action by a court to indemnify a person for the particular loss, detriment, or injury suffered as a result of the unlawful conduct of another.
Compensatory damages provide a plaintiff with the monetary amount necessary to replace what was lost, and nothing more. They differ from PUNITIVE DAMAGES, which punish a defendant for his or her conduct as a deterrent to the future commission of such acts. In order to be awarded compensatory damages, the plaintiff must prove that he or she has suffered a legally recognizable harm that is compensable by a certain amount of money that can be objectively determined by a judge or jury.
One of the more heated issues facing the U.S. legal system during the past quarter century has been the call for reform of states' TORT LAWS. HEALTH CARE providers and other organizations have sought to limit the amount of damages a plaintiff can receive for pain and suffering because they claim that large jury awards in MEDICAL MALPRACTICE cases cause premiums on medical insurance policies to rise, thus raising the overall costs of medical services. California took the lead in addressing concerns with rising medical costs when it enacted the Medical Injury Compensation Reform Act, Cal. Civ. Code § 3333.2 (1997). The act limits the recoverable amount for non-economic loss, such as pain and suffering, to $250,000 in actions based on professional NEGLIGENCE against certain health care providers. Although the statute has been the subject of numerous court challenges, it remains the primary example of a state's efforts to curb medical costs through tort reform.
Other states have sought to follow California's lead, though efforts to limit compensatory damages have met with considerable resistance. Opponents claim that because these limitations greatly restrict the ability of juries and courts to analyze the true damage that plaintiffs have suffered, defendants avoid paying an amount equal to the harm inflicted upon the plaintiffs. Medical organizations, such as the AMERICAN MEDICAL ASSOCIATION, continue to advocate for limitations on damages, however, and they have sought to encourage state legislatures to enact such provisions.