Did you ever hear that term “economic damages” and wonder “What is that?” Before I started performing economic damages analyses, I did too. My attorney friends probably think that’s ridiculous. However, I feel like the term has a vague ominous aura to it and you don’t really understand it unless you have experienced it in a lawsuit.
Economic damages are calculated from documents or records related to the type of loss (loss of wages and earnings, a person’s or company’s future lost earnings capacity and profits, real and personal property damages) in an attempt to measure, in financial terms, the extent of harm a party has suffered. Damages are recovered in the courts by a person or business that has suffered a loss resulting from an unlawful act or negligence of another party.
These losses can occur as a result of a personal injury (such as a car accident), physical damage to a business (such as a fire), a variety of corporate litigation issues (such as a breach of contract), etc. There are different legal principles that apply to the proof of damages and recovery of losses in different kinds of matters. An attorney is the best source of this information, so I won’t delve into that here.
The calculation of the economic damages generally takes into consideration the period of the loss, the definition of lost profits applicable to the matter, and, where a business has been destroyed, the valuation of the business. The estimate of economic damages is performed either for the insurance company, the wronged party, their attorney, or the trier of fact (ex. judge or jury).
Stay tuned for more on this topic, including case examples, in future blog posts.