Non-tangible loss or non-economic losses are defined as losses that cannot be quantified, unlike damages such as medical bills or lost income. Mental agony, stress, physical pain, fear, anxiety, disfigurement, loss of enjoyment of life, loss of companionship, loss of reputation, etc., these damages cannot be measured monetarily or numerically using receipts or invoices; specific methods have been devised to estimate their monetary value legally.
However, there are established and widely accepted approaches to calculate the non-economic damages for compensation. The legal methods aim to fairly compensate victims of a personal injury claim for the subjective, life-altering effects of their injuries.
Understanding Non-Economic Damages
The extent of the damages a person sustains after an accident depends on the severity of the victim’s injuries, how the injury impacts their life, and the emotional toll it takes. Sometimes, the setback they face may be temporary, while at other times, it could be permanent. For the same reason, two individuals in similar accidents may be compensated differently based completely on how the injuries affected their mental health, relationships, and getting back to their pre-accident life.
To avoid unfair settlement, a standardized method is put in place to estimate the loss. The most commonly used methods are the Multiplier method and the Per Diem method.
The Multiplier Method
The most widely used method is the multiplier method. In this method, total economic damages such as medical expenses and lost wages are added up and then multiplied by a multiplier to arrive at a value for non-economic damages.
The multiplier could range between 1.5 to 5 and is subject to the injury intensity and its effect on the quality of the individual’s life. To state an example, if the individual got $50,000 in economic damages with 3 as the multiplier, then the total non-economic damages would total to $150,000.
Factors that influence the selection of a multiplier are:
- Physical pain’s severity and duration
- Emotional distress and psychological trauma due to the accident
- Disruption to the daily activities and its magnitude
- After-effects status of the injury, whether temporary or permanent
- Reliability of medical and psychological evidence
The method is structured at the same time, flexible, and works on a case-by-case basis, which accommodates the uniqueness of each case while disbursing compensation.
The Per Diem Method
The per diem system has a pre-fixed value for each day of suffering the victim experiences from the date of the accident till the date they reach maximum medical recovery. The system was instituted to monetarily quantify the discomfort, inconvenience, and emotional trauma undergone by the person.
To put it in real terms, assuming the court or insurer has fixed $200 per day as a reasonable rate and the person reaches maximum medical recovery after 180 days, the per diem method would calculate the damages as $36,000.
The factors used to calculate the per diem rate are based on the individual’s daily wage or an estimate of the psychological toll of living with the injury. This method is best suited for those who have a fixed recovery period and is more beneficial than the multiplier method.
Factors that Influence the Chosen Method
When selecting the multiplier and per diem methods, the specifics of the case are considered. Insurance adjusters consider the following factors:
- Nature and duration of injury: The compensation for the per diem method is used for short-term injuries and the multiplier method for long-term or permanent injuries.
- Documentation and evidence: Reliability of the medical records, therapy notes, and witness testimony for establishing credibility of the suffering.
- Jurisdictional preferences: Preference for a particular method in some state over the other, or capping of the amount as non-economic damages.
Irrespective of the method chosen, claiming and proving the legitimacy of non-economic damages would require the submission of strong supporting documentation and expert testimony.
Challenges in Quantifying Intangible Losses
As damage claim is a very subjective issue, one man’s suffering and disarrayed life may seem insignificant to another. The opposing party could easily claim exaggeration of symptoms or distress related to some other incident prior to the accident.
Complete and thorough paperwork with expert’s guidance and rehabilitation measures often help in bolstering the claim. These help in building a stronger case for non-economic compensation.
Conclusion
Non-economic damages are a crucial component of personal injury claims. The deeply personal and emotional consequences of physical injuries cannot be calculated with mathematical precision. However, structured methods like the multiplier and per diem approaches help in providing a framework for fair compensation.
The methods try to capture as realistically as possible the suffering of the individual and make up financially the emotional and physical loss at present and in the future.
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