Which of the following statements describes compensatory damages?

Compensatory damages are specifically designed to recompense a plaintiff for actual losses they have suffered as a result of a defendant's actions. The primary goal of these damages is to restore the injured party to the position they would have been in had the harm not occurred. This can include reimbursement for medical expenses, lost wages, property damage, and other economic losses directly linked to the wrongful act.

The other options do not correctly define compensatory damages. For instance, punitive damages (not compensatory) are aimed at punishing the offender and deterring future misconduct, which is not the function of compensatory damages. Emotional distress may be taken into account when assessing damages, but compensatory damages focus primarily on tangible losses rather than just emotional effects. Additionally, compensatory damages are contingent on the success of the lawsuit; they are not awarded automatically regardless of the outcome. Thus, the essence of compensatory damages lies in their purpose to reimburse actual losses, making the second statement the accurate choice.