What are non-economic damages?

Non-economic damages are one category of the financial awards that can come from lawsuits. This type of damage is for an intangible hardship, such as pain or mental anguish, that cannot be easily measured.   

Economic damages, another category of lawsuits’ financial awards, can be documented with medical bills or lost wages, for example. There is no cap on economic damages in Maryland.   

How did we get here?

Maryland first capped non-economic damages in 1986 at $350,000. This limit is increased every year by $15,000. It is now at $980,000 and scheduled to rise again in October 2027.   

Why did Maryland cap non-economic damages?

Maryland chose to cap non-economic damages because pain and suffering are difficult to quantify, and because putting a reasonable cap on those types of damages balances compensation for victims with preserving a stable business climate and controlling costs for average residents.  

Maryland allows a broader range of non-economic damages to be awarded than neighboring states, some of which have no cap.   

What would happen if the non-economic damage cap were removed?

Most likely, it would mean higher costs for insurance and other goods and services. Businesses might cut back in Maryland or leave altogether.  

An analysis conducted by an independent actuarial firm in 2024 found that increasing the non-economic damages cap to $1.75 million could increase personal auto premiums by up to 19% and commercial auto premiums by as much as 30%.  

A big change like this would hit Maryland families and businesses hard, as many are already struggling, and as the Maryland General Assembly is considering other tax and fee increases to address a looming budget gap. 

What is a “tort tax” and how does it apply to this proposed change?

When lawsuit frequency and award size goes up, the risk to businesses increases as well. This makes it more expensive for small businesses to insure against legal liability, so small business owners often raise prices to pay for the higher costs they face. 

The amount varies from state to state, but the impact of more litigation, higher awards, and fraud is reflected in higher prices for goods and services across the economy. This is the tort tax. 

 The average U.S. family pays a tort tax each year of about $5,000, according to research by The Perryman Group.    

Maryland is already in the top 15 most expensive states for lawsuits, as measured by its “tort tax.” Removing the limit on non-economic damages would move it higher up that list and increase the amount Maryland families must pay for things like insurance, housing, transportation, and the goods in our grocery stores.   

Who wants the change?

We fear some of the biggest supporters are people seeking to profit from large financial awards, known as “nuclear” or “thermo-nuclear” verdicts. That could include private investors who see lawsuits as an investment opportunity.