What type of damages are compensatory damages?

Compensatory damages refer specifically to monetary compensation awarded to an injured party to cover actual losses incurred due to another party's actions or negligence. This can include a wide range of losses such as medical expenses, lost wages, property damage, and other types of economic harm directly resulting from the incident in question. The purpose of compensatory damages is to make the injured party "whole" again, as much as possible, by reimbursing them for the losses they have suffered.

This concept is distinct from other types of damages, such as fines, which are punitive in nature and intended to punish a wrongdoer rather than compensate the victim. Incentives for settlements aren't classified as compensatory damages, as they relate more to encouraging parties to resolve disputes amicably. Punitive damages, on the other hand, aim to punish particularly egregious behavior and deter future misconduct, rather than to compensate the injured party for their specific losses. Thus, the focus on monetary compensation for actual losses is what firmly establishes why this choice is correct within the context of compensatory damages.