Legal Definitions - cap

A "cap" refers to a predetermined upper limit or maximum amount that can be applied to various financial figures, benefits, or liabilities. It serves to restrict or control the total sum, rate, or quantity of something, ensuring it does not exceed a specified threshold.

• Insurance Payouts: Imagine a health insurance policy that states it will cover a maximum of $2 million in medical expenses over the policyholder's lifetime. This $2 million is the cap. Regardless of how extensive or costly a policyholder's medical treatments become, the insurance company's total financial responsibility for covered expenses will not exceed this set limit.

• Legal Damages: In some jurisdictions, laws impose a cap on the amount of non-economic damages (such as compensation for pain and suffering or emotional distress) that can be awarded in certain types of lawsuits, like medical malpractice cases. For example, a state might limit such damages to $500,000. Even if a jury determines that a plaintiff's suffering warrants a higher sum, the legal cap prevents the final award for non-economic damages from exceeding this statutory maximum.

• Government Spending: A city council might decide to implement a cap on the annual budget increase for its public works department, limiting it to a maximum of 3% over the previous year's budget. This means that even if the department requests a 5% increase due to new projects or rising costs, the council's cap ensures that the approved budget increase will not surpass 3%, controlling overall municipal spending.