Putting a Price on Pain-and-Suffering Damages: A Critique of the Current Approaches and a Preliminary Proposal for a Change

This article courtesy of SSRN - Legal Scholarship Network and authored by RONEN AVRAHAM.

Abstract: Pain-and-suffering awards make up approximately fifty percent of total awards, at least in some areas of personal injury cases. It is the subject of almost every tort reform, including the current administration attempts to reform medical malpractice law. Is there a rational way to quantify pain-and-suffering awards? In this paper, written for a special centennial issue of NU law review, I explain some of the suggestions for pricing pain-and-suffering put forward in the literature and preliminary offer a different way to look at the problem.

The theoretical approach I adopt in this paper to the pricing of pain-and -uffering is to analyze it from a law and economics standpoint, which also incorporates a limited notion of global fairness. My starting point is the "majority view" which states that efficient tort law requires pain-and-suffering damages to be awarded so tortfeasors will internalize the full social costs of their conduct, including the non-monetary ones. My focus in this paper is the fundamental unresolved issue of how to price such damages.

After reviewing various proposals for pricing pain-and-suffering, I argue that all of these proposals are analytically problematic, and undesirable as a matter of policy. I then propose a new way to price pain-and-suffering. Under my proposal, a system of age-adjusted multipliers would be assigned to plaintiffs' medical costs (but not to other economic costs) in order to calculate the pain-and-suffering component. The multipliers would be non-binding, allowing the jury to fairly deviate when justice required. This system solves the problem of unpredictability and, at the same time, approximates optimal deterrence, all at very low administrative costs. It combines the advantages of efficiency and fairness by having a jury determine awards on a case-by-case basis, without the high complexity of assessing pain-and-suffering losses present in other proposals.