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How Do Damage Caps Work?

Posted in personal injury on December 11, 2017

When injured persons file a lawsuit to recover damages, they hope to receive fair financial compensation. Sometimes they will hear the amount awarded by the jury and think they will receive that amount. However, many states have passed laws limiting the payout amount, the so-called damage cap. Read on to learn more about damage caps, what types of damages face caps, and other rules that affect the amount awarded in a lawsuit.

What Are Damage Caps?

If an individual is injured because of negligence during medical care, he or she may file a medical malpractice claim. This lawsuit claims a provider did not practice standard operating procedures, failing to diagnose or treat a patient’s injuries.

A damage cap exists to limit how much a service provider will have to pay, with each state enacting its own limits. States set these caps to prevent juries from awarding excessive payout amounts. Damage awards of millions of dollars would drive up insurance costs and eventually raise doctors’ fees to deal with the upwardly spiraling costs.

Some states block lawyers from mentioning a damage cap, thus freeing the jury to award whatever they deem fair and enacting the cap after the fact. In some cases, judges have capped the payout themselves to reduce a payout to something they considered reasonable.

Caps for Different Damages

Even in situations where the law requires payout caps, the type of damage awarded determines which cap applies. Several categories of damages exist, including economic, non-economic, and punitive.

Economic and Non-Economic Damages Caps

Any concrete, measurable expenses for medical care, rehabilitation, or loss of wages falls into the economic category, with defined limits already in place. Non-economic damages cover any damages not already included in the economic category. This includes pain and suffering, loss of quality of life, and mental anguish.

These damages do not follow definable expenses or future expenses based on already known data or charts. A jury must employ a subjective approach to determine non-economic damage payouts.

Most states have passed caps on these types of damages. However, states exempt cases that deal with wrongful death or grievous injuries (e.g., loss of limb, organ, etc.) from the damage caps entirely or have a higher cap in place.

Punitive Damages Caps

These damages, sometimes called exemplary damages, serve to punish willful acts of wrongdoing. These damages should deter the wrongdoer and others in a similar position from these acts in the future.

Federal guidelines set in place in 2005 place limits to prevent extremely high punitive damages payouts; however, these limits still allow large awards in certain situations. States took this a step further, placing strict limitations on punitive payouts in personal injury claims, some eliminating them altogether. A variety of caps now exist, some with multiplying factors to set caps in place.

Other Rules

States established further tort reforms. For example, a plaintiff once could receive all damages from a single defendant when multiple defendants shared the blame. Now, the obligation to pay applies to all defendants.

Another rule added by the states, collateral source, prevents defendants from mentioning any compensation a plaintiff may have already received, like payouts from the plaintiff’s own insurance. This prevented juries from potentially reducing a payout by taking into account payments already received. This rule applies to all medical malpractice lawsuits and in many personal injury claims. Some state courts later declared this rule unconstitutional.

Several resources exist to help you find out what damage caps exist in your state, as well as what exemptions or special rules apply for specific situations.