A damages cap is a statutory limit on the amount a plaintiff can recover for a category of damages, most often noneconomic or punitive damages. It truncates the upper end of the outcome distribution.
Caps are set by legislatures and apply to particular claim types, such as medical liability, or to particular damages categories. Some have been struck down in certain states and upheld in others, so their status is jurisdiction-specific and can change.
For pricing, a cap bounds the best case and compresses variance, which affects both the expected recovery and the shape of the settlement band.
A damages cap is not a limit on settlement above the cap in every instance. Some structures and claims fall outside it, and the details of the statute control.
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