Wrongful Death Compensation: How Much?

I stumbled on an interesting Chicago Law Review article today by Eric Posner (Judge Richard Posner’s son) and Cass Sunstein (now with the Obama administration). I like Sunstein’s views on a number of issues, including animal rights.

The subject article is how the legal system assigns money damages to the loss of human life in wrongful death cases with an eye towards creating greater uniformity. The authors approach this question like it was a mathematical equation to be solved. For grief, the authors conclude that $500,000 is a good starting place, suggesting this formula as the paradigm to determine compensation in wrongful death cases:shutterstock_65916643

To derive a willingness to pay (WTP) to avoid grief from a spouse’s death, one would need to (1) determine the average length of time that the grief persists (for example, until remarriage); (2) find an equivalent happiness difference in an area of life that has been reliably monetized (for example, willingness to pay to avoid disease or depression); (3) convert this difference into annual units; and (4) multiply (1) by (3).

I understand the goal of uniformity and I even understand the formula. The problem is homogenizing the equation for everyone. Values vary because juries vary but also because facts vary wildly from case to case. Moreover, the formula is artificially low because it uses how much you will spend to avoid a loss to determine how you value the loss. For example, if you are willing to pay $5 to avoid a 1/100,000 risk of death to your spouse, than the loss of your spouse is worth $500,000.

I think this formula breaks down because people are not as rational as mathematical models. You might be willing to pay only $5, but you would never trade your spouse for $5 million. Why? Because many if not most people assume that such an unlikely outcome will never happen to them because their experience tells them that the long-shot never comes in, for better or worse (they have never hit the lottery either). No one really is given the opportunity to honestly make the valuation either. How many people who pay $40 for a bike helmet have calculated the odds of death in not wearing a helmet? The formula assumes perfect information when wrongful death victims-to-be have nothing resembling full information to make a decision. (This is why so few people have disability insurance but there is a product available called terrorism insurance.)

Of course, the reverse can also be true. You might not care at all about your spouse’s death. I want the jury to be given the opportunity to figure out which is which. Because you deserve less in compensation.

There is also a lot I like about this article. For one thing, the authors agree that there is a valuable loss to society to be considered in wrongful death cases:

[P]eople produce value that they do not fully consume or give to dependents; this value benefits strangers in the larger society. Workers produce goods that consumers value more than the price that they pay; entrepreneurs start new businesses that employ people; people give to charity; inventors invent products whose value is greater than what the inventors can capture through patent law; the same is true of authors of books and the protections of copyright law; there are countless Good Samaritan acts; and many people devote their lives to public service. When these people die, isn’t there a loss to society beyond the loss to the person who dies and his immediate family and friends?

Read the entire article: Dollars and Death, 72 U. Chi. L. Rev. 537 (2005). Chances are, you will find some of it genius and some of it ridiculous. But you will find all of it well written and thought provoking, even the parts with which you disagree.

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