W000573
Monday, November 26, 2001 12:46 PM
Reply to Request for Comments
Attachment 1:
Nov. 26, 2001
Re: Reply to Request for Comments on Computing Noneconomic Losses
Dear Mr. Zwick:
I enclose comments on the above-referenced request. These comments represent my own views and not those of the .
Determination of noneconomic losses for pain-and-suffering prior to death has proved to be troublesome for the courts for numerous reasons, resulting in wide variation of awards. See generally David W. Leebron, Final Moments: Damages for Pain and Suffering Prior to Death, 60 N.Y.U. Law Rev. 256 (1989). The absence of well-defined legal standards for computing noneconomic loss poses a potentially severe problem for administering the September 11 Victim Compensation Fund of 2001. Indeed, a recent article in the New York Times discusses the various approaches that lawyers plan to use in arguing for noneconomic loss. Case-by-case determination of noneconomic loss will be both time-consuming and expensive. The determination is unlikely to be satisfactory for most claimants given the absence of well-defined metrics.
In my view, there is a method for determining noneconomic loss in a manner that is consistent with the case law. See Mark Geistfeld, Placing a Price on Pain and Suffering: A Method for Helping Juries Determine Tort Damages for Nonmonetary Injuries, 83 Cal. L. Rev. 775 (1995). The approach is routinely used by government regulators when setting regulations protecting health and safety. The approach recognizes that there is no true "objective" measure of such losses; instead, the noneconomic loss suffered by each individual depends solely on how the individual evaluates the loss, which depends on her age, wealth, and nature of the risk.
Consider the occupants of the two planes that crashed into the World Trade Center. As paying customers, these individuals, like all consumers, consider risk in terms of what they would be willing to pay to eliminate the risk by either insurance (like compensatory tort awards) or safety investments. Suppose at the time of ticket purchase the risk of dying by a hijacking is 1 in 10,000. If each passenger were to consider the monetary equivalent of the terror she would experience prior to death, she would determine that amount by finding the maximum amount of money she would be willing to pay (WTP) to eliminate the risk. The WTP amount makes her indifferent to (1) the state of the world in which she does not face the risk and pays the WTP amount to eliminate it; and (2) the state of the world in which she faces the risk and has higher wealth because she has not paid the WTP amount to eliminate the risk. Valuation of risk in terms of the WTP amount is routinely used by government regulators and has a well-established foundation in welfare economics. Importantly, the WTP amount provides a straightforward method of calculating the total cost of the noneconomic loss for the individual. The individual compares the WTP amount to the amount of loss, denoted L, which is discounted by its probability of occurrence (yielding the expected value of loss). By definition, in the above example: WTP = (1/10,000)L. Consequently, the individual's valuation of the loss L can be computed by multiplying the WTP amount by 10,000.
Calculation of noneconomic loss for other victims relies on the willingness to accept (WTA) measure, which makes the individual indifferent between (1) the state of the world in which she does not face the risk; and (2) the state of the world in which she faces the risk and receives the WTA payment to face it. In effect, the WTA measure is the monetary equivalent of the benefit an individual must receive to assume a risk. Again, this measure is used by government regulators and has a solid foundation in welfare economics. The measure yields the individual's implicit valuation of the injury if the WTA amount is multiplied by 10,000 in the above example.
As I establish in my previously referenced article, this approach to computing pain-and-suffering damages is consistent with the requirements of the case law and has numerous advantages over the current approach. The approach could be used on a case-by-case basis, as I argue in the article, or could be used for scheduling purposes. In administering the September 11 Victim Compensation Fund of 2001, scheduling is desirable due to the large number of claims, particularly given the lack of direct evidence regarding each individual's final moments before death. These schedules could be based on WTA or WTP measures derived from surveys conducted specifically for the fund, or from sufficiently analogous surveys conducted by government regulators or academics. In the event a new study is required, it must rely on some number for the probability of injury. An assumption along the lines of 1 in 10,000 would yield reasonably good results.
The virtue of this approach is that it provides a defensible explanation for the amounts to be used in the schedule. Any schedule is unlikely to satisfy everyone, but any given schedule ought to be capable of justification. Such justification is provided at length in my article, which is attached to this email.
Sincerely Yours,
Individual Comment
New York, NY
Attachment 2:
83 Calif. L. Rev. 773
California Law Review
May, 1995
PLACING A PRICE ON PAIN AND SUFFERING: A METHOD FOR HELPING JURIES
DETERMINE TORT DAMAGES FOR NONMONETARY INJURIES