What are Damage Caps in a Personal Injury Case?

In each state, there are specific statutes that govern the limits of compensation that may be awarded for damages in a personal injury claim. Continue reading to learn more about personal injury damages, including facts about damage caps and similar limitations on personal injury recompense.

Personal Injury Settlement Lawyer Indiana 317-636-7497
Personal Injury Settlement Lawyer Indiana 317-636-7497

Compensation Limitations for Personal Injury Claims

State laws and various other legal principles have the ability to restrict the amount of money that can be awarded for damages in a personal injury case. These statutes vary from state to state and depend on a wide range of factors. Personal injury claims generally recognize and consider three types of losses, referred to as “compensatory damages”, which include economic losses, future economic losses, and non-economic losses. See our blog, “A Brief Explanation of Compensatory, Nominal, and Punitive Damages” to learn more about these types of personal injury damages.

Economic losses may include medical expenses, hospital bills, OTC medication costs, prescription costs, lost wages, time off work, childcare expenses, home maintenance expenses, fuel costs (to and from doctors’ visits), and similar expenditures.

Types of future economic losses may include prolonged medical treatment, physical therapy, long-term care, future medical expenses, future prescription costs, future hospital costs, and more. Non-economic losses may include pain and suffering, permanent disability, permanent disfigurement, mental anguish, PSTD, loss of social life, loss of work abilities, loss of companionship, loss of education experience, and more.

Non-Economic Damage Caps

Generally, state statutes set limits on the amount of money that can be awarded for damages in a personal injury case. These limits are known as “damage caps”, and they differ depending on the state in which the accident took place, type of injury, the scope of loss, and several other relevant factors.

Since economic damages are more concrete, there are not usually compensation limits set by the state. However, non-economic damages and punitive damages are more subjective in terms of evaluation, which is why most states integrate damage caps into the law.

For instance, it is very common practice for states to have a damage cap on medical malpractice cases. Common limits for personal injury cases can range anywhere from $350,000 to $750,000. Although damage caps exist for many personal injury cases, there are exceptions to the rule, such as in the case of wrongful death, loss of limb, and severe injuries.

Punitive Damage Caps

Punitive damages, also known as exemplary damages, are intended to punish the at-fault party, while also setting an example to the public as a deterrent for the particular negligence involved in the case. Generally, the amount of compensation awarded for punitive damages is based on the net worth or wealth of the at-fault party.

However, many states set limits as to how much a tortfeasor can be ordered to pay. These are known as punitive damage caps. States use different formulas and schedules for such caps, including fixed limits, fixed multipliers, and more. For example, a state may set a punitive damage cap at three times the amount of total economic and non-economic damages in a personal injury case.

Are you and injured victim looking for a skilled civil litigator to represent your personal injury case in Indiana? Contact Carl Brizzi LAW at 317-636-7497 to speak with a seasoned personal injury lawyer in Indianapolis, Indiana. Meet over the phone or in person for a free consultation.

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Will My Personal Injury Settlement Be Taxed?

When injured victims are awarded compensation in a personal injury claim, it is because the opposing party was responsible for the accident, which directly caused the victim’s injuries and subsequent losses, also known as damages. Examples of personal injury damages include pain and suffering, as well as medical expenses, hospital bills, lost paychecks from time missed at work, and even mental and emotional traumas. In the case that the at-fault party was exceedingly reckless or negligence, or intentionally caused the accident, a victim might be awarded punitive damages, which are meant to punish the responsible party and set an example for the rest of the community.

In all cases of collecting compensation for damages in a personal injury case, a common question that arises has to do with taxes. Many accident victims want to know if they have to pay taxes on their personal injury settlement, and if so, which damages are taxable, and which are not. If you are asking yourself this same question as you prepare to file an injury claim, you will be pleased to know that most of your potential settlement will not be taxed; however, there are some types of awarded damages that will.

Continue below to learn some basic facts about personal injury settlements and taxes, including how to determine your eligibility for pursing legal action against the party who caused your wrongful accident.

Personal Injury Law Firm Indianapolis Indiana
Personal Injury Law Firm Indianapolis Indiana 317-636-7497

Personal Injury Settlements and Taxes

It can be confusing understanding which personal injury damages are taxable, and which are not, but the IRS does make the taxable statuses of all personal injury compensation clear. If you have questions, contact your local IRS office, or speak with a trusted Indianapolis injury lawyer.

NOT TAXED:

✤ Pain and Suffering

Many personal injury victims are awarded compensation for the pain and suffering they so wrongly had to experience as a result of their accident. These damages are non-taxable.

✤ Medical Expenses

In a successful personal injury case, accident victims are typically compensated for their medical expenses, such as bills, devices, medications, and therapy. These damages are non-taxable.

TAXED:

✤ Lost Work Wages

Victims can be awarded compensation to make up for the income they lost while recovering from their injuries. These damages are taxable, both state and federal, as well as all other applicable taxes that are generally deducted from paychecks.

✤ Punitive Damages

Courts often punish grossly negligent at-fault parties by awarding accident victim’s punitive damages. Although there are exceptions, these damages are usually taxable.

✤ Interest

In the case that a personal injury case goes to trial, it is possible for the court to add interest to the final judgement, starting from the date of the lawsuit to the date their settlement is paid out. This interest is taxable.

BOTH:

✤ Mental and Emotional Trauma

Depending on the details and circumstances of a victim’s incurred emotional trauma and mental anguish, damages awarded may or may not be taxed. Emotional trauma and mental anguish must originate from the physical injuries suffered from the accident in order to be non-taxable.

Here is an example to help you understand: If a person is seriously maimed in an animal attack accident, and as a result developed severe psychological effects or PTSD, damages awarded would be NON-TAXABLE. Oppositely, if the victim developed PTSD or similar psychological consequences as a result of being shunned or defamed after the accident, such damages would be TAXABLE.

Do you have questions about making a personal injury claim after a serious accident? Contact Carl Brizzi, a lawyer with Lewis And Wilkins LLP (LAW) at 317-636-7497 to schedule a free case evaluation with a skilled and experienced accident attorney in Indianapolis, Indiana. We represent injured persons throughout the State, and offer meetings over the phone or via online conference.

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Carl Brizzi Law Indianapolis Indiana
Carl Brizzi Law Indianapolis Indiana 317-636-7497