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Reviewed by Jul 30, 2021| Updated on
Compensatory damage is money awarded to a claimant to compensate for damage, injury, or other loss incurred. Compensatory damage is awarded in a civil court case where there has been a loss as a result of another party's negligence or unlawful conduct.
The claimant must show that a loss occurred and that it was due to the defendant, in order to receive compensatory damages. The claimant must also have the ability to quantify the amount of loss in front of the jury or judge's eyes.
Compensatory damages are different from punitive damages, which can cover more than any loss or damage suffered, and are meant to provide an incentive against repeating the act that caused the loss or damage to the claimant.
Cases relating to compensatory and punitive damages are a significant source of debate in the area of health insurance, as tort reform proponents claim that unfair penalties over actual loss were sustained in order to increase overall healthcare costs.
Compensatory damages are meant to provide a lawsuit's victim with additional money to cover the defendant's harm incurred.
Sometimes, compensatory damage can be hard to assess. For example, for a more wealthy member of society, the value of lost wages will be much higher than someone who is poor or retired.