Separating Causation, Liability and Economic Damages

By: Jeff George

If a fire burns down a business and the business loses profits, should you argue whether the fire caused the lost profits or who started the fire, and can you clearly define the difference to a jury?

It is clear in this scenario that the fire burning the building down is the cause of the business losing profits. Determining who is responsible for the fire is where attorneys will argue over liability. Being able to distinguish between causation and liability can be very important when dealing with economic damages. In today’s litigation world, it seems that everyone is focused on liability, liability, liability. And while liability is central to a dispute, it is not the only piece that must be considered. Even if a party believes they were harmed, there needs to be a reasonably certain, quantifiable financial loss or harm associated with the allegations related to the cause of the damages. Because really, what does liability matter if there aren’t any financial implications?

The financial implications in a case often stem from damage and damages. It is important to remember that these terms are not synonymous and are not interchangeable. In the legal world, damage is defined as a loss or harm resulting from injury to a person, property or reputation. Damages, on the other hand, refers to compensation — such as a mandatory judgment — provided to a person who has suffered a loss or harm due to the unlawful act or omission of another.

So, once the damage occurs, the claim for liability and damages soon follows — often in the form of litigation. This is the distinction between causation and liability. The consideration of filing a lawsuit means lawyers are brought in, and the consideration of damages often means retaining a financial expert.

To read this story and other complete articles featured in the April 16, 2017 print edition of Law Week Colorado, copies are available for purchase online.