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DAMAGEAWARDS

Damage awards function as a remedy for wrongdoing

in civil lawsuits; they constitute money awarded to an

injured party as compensation for injuries or other

losses (“compensatory” damages). They can also serve

as punishment for the wrongdoer (“punitive” dam-

ages). These awards are made mostly by juries and

occasionally by judges who previously determined that

a wrongdoer was liable for damages. Determining

damages—especially for intangible injuries such as

pain and suffering—can be difficult, and juries have

been criticized for issuing awards that seem extrava-

gant and unpredictable. Although some of the criti-

cisms are unfounded (e.g., jurors are not especially

sympathetic toward plaintiffs), jurors occasionally do

experience difficulty in applying jury instructions and

following procedures that blindfold them to the conse-

quences of their verdicts. Reforms intended to address

these issues should be based on empirical analysis, and

psychologists are well-positioned to provide the rele-

vant data.

Various Kinds of Damage Awards

Damage awards are of two general types, compen-

satory and punitive, and they serve different functions.

Compensatory awards are intended to return an

injured person or entity (e.g., a business, agency, or

corporation) to pre-injury levels of functioning—that

is, to restore that party to the position it was in prior to

the injury or harm. For example, a person injured in

an automobile accident may receive a compensatory

damage award to cover any medical costs, lost wages,

and pain and suffering related to the injuries sustained

in the accident. As another example, a business may

receive a compensatory damage award to cover any

revenues lost to competitors involved in price-fixing,

trademark infringement, or sharing of trade secrets.

Compensatory damage awards are themselves of

two sorts: economic and noneconomic. Economic

damages are intended to cover the financial or eco-

nomic costs incurred by the injured party. These can

include past and future lost wages, past and future

expenses related to medical care and rehabilitation,

past and future lost profits, and loss of reputation or

business opportunity. In theory, these awards should be

relatively easy to gauge because they are generally tied

to objective data such as hospital bills, costs of prop-

erty repairs, and amount of time away from work. In

fact, even these losses are difficult to assess because

they require jurors to make predictions about the future

and then to discount their awards to present value (i.e.,

the injured party is given an economic damage award

now that will, over time, grow to equal the amount that

the jury has deemed appropriate). In addition, they

may require a jury to agree on economic uncertainties

such as future interest rates, the likelihood that injured

persons would have been promoted or received raises

or that businesses would have been profitable had they

not been harmed, and projected life expectancies for

persons who require lifelong care.

Determining noneconomic damages can be even

more problematic. Their function is to compensate the

injured party for “pain and suffering,” including bodily

harm; emotional distress, such as fear, depression,

and anxiety; loss of enjoyment of life; and pain and

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