Why we say being “compensated” rather than “paid.”

When you are the victim of a car accident, there are several categories of monetary relief to which you are entitled. Each one of them is designed to compensate you for a loss. Some of the categories are:

1. Past medical bills. This is self-explanatory, simply compensation for the cost of the medical bills you incurred while treating. Often, this gives us a basis for the rest of the damages, and can often be negotiated if necessary.
2. Future medical bills. Some people will never fully recover from their injuries. Maybe they have lifetime back pain, or are left disfigured or unable to use parts of their body. In this case, those bills need to be paid.
3. Loss of enjoyment. Imagine you are an avid bicycle racer and you lose partial loss of your right knee in a car accident. You can see that some activities require special compensation.
4. Loss of use. You can literally lose a body part in a car accident, or lose its use. There is special compensation for this exact thing.
5. Lost wages. If you had to miss work during your treatment period or for any reason related to your car accident, you can be compensated for the work you missed.
6. Pain and suffering. The inconvenience and pain you experienced during this time can be compensated.
7. Loss of consortium. In some cases, the spouse or children can recover for the loss to the relationship with the plaintiff.
8. Attorney fees and costs. In some situations, your attorney fees and costs can be paid by the tortfeasor.

All of these categories of compensation are designed to make a plaintiff whole again after experiencing an injury. The law is not designed to give you a windfall. This is a very important distinction. Our job is to make sure you don’t lose any of your potential recovery, not to make you a profit. There are two very important reasons for this distinction.

First, insurance companies are indemnitors. This means that the insurer is obligated to step in and cover your liability when you cause a car accident. In exchange, you pay them a premium. They cover damages caused by your negligence, and are not obligated to pay profits or windfalls.

Second, personal injury settlements are generally not taxable, except that portion which represents lost wages. Often, that portion is not clearly designated when it comes to a settlement, so rarely are settlements taxable. If you made a profit, you would have to pay taxes.

All this being said, you can end up with a nice chunk of money in your pocket after a car accident. But it is important to know that our liability system is designed to compensate you, not hand you a profit.