What is the difference between actual and potential damages?

Actual damages are the monetary amount awarded to a plaintiff for losses that have already occurred, such as medical bills or lost wages due to an inability to work. Potential damages, on the other hand, are those damages that may still yet occur, such as a future loss of income or earning capacity. In Texas, actual damages are recoverable in a catastrophic injury case. These damages may be awarded to make up for the actual economic losses a victim has suffered, such as medical costs, lost wages, loss of earning capacity, and pain and suffering. In contrast, potential damages, also referred to as punitive damages, are designed to punish and make an example of a wrongdoer. They are meant to deter similar future actions by other parties. The court may determine that an amount should be awarded based on the severity of the injury and other factors, such as the defendant’s culpability and the amount of money that would be necessary to deter similar conduct in the future. Therefore, the difference between actual and potential damages is that actual damages are compensatory, meaning that the plaintiff is awarded for losses that have already occurred, while potential damages are punitive, meaning that the defendant is ordered to pay a sum of money to discourage similar behavior in the future.

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