Alabama Property and Casualty Practice Exam

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What type of losses do compensatory damages typically aim to cover?

financial losses only
non-economic damages
both economic and non-economic losses
emotional distress claims

The correct answer is: both economic and non-economic losses

Compensatory damages are designed to provide a monetary compensation that reflects the actual loss incurred by an injured party. This type of damages encompasses a wide range of losses, which include both economic and non-economic losses. Economic losses are quantifiable monetary losses that a person suffers as a result of an incident. This can include medical expenses, lost wages, and property damage. Non-economic losses, on the other hand, refer to intangible damages such as pain and suffering, emotional distress, loss of consortium, and other similar impacts that do not have a direct financial measurement. By covering both types of loss, compensatory damages aim to restore the injured party to the position they would have been in had the incident not occurred, addressing all aspects of their suffering and loss, rather than just the financial implications. This comprehensive approach aims to ensure that the individual receives fair restitution for their overall experience and hardship caused by the wrongful acts of another party.