Saving Lives through Punitive Damages

Abstract:     
This article proposes that the value of statistical life be used to set the total damages amount needed for deterrence when punitive damages are warranted in wrongful death cases. The appropriate level of damages should be achieved by adjusting the value of punitive damages. Compensatory damages should not be distorted to establish the total damages level needed for efficient deterrence. Attempts to introduce hedonic damages as a compensatory damages component and proposals to use the value of statistical life on a routine basis when setting compensatory damages awards are misguided and will undermine the insurance and compensation function of compensatory damages. The U.S. Supreme Court’s focus on punitive damages ratios is misplaced, as it is the total damages amount, not the ratio, that is instrumental. The criteria for evaluating punitive damages in bodily injury cases should be different than for property damages cases. The composition of compensatory damages is especially important for bodily injury cases. Empirical analysis of current state court awards in bodily injury cases shows the desired positive relationship between punitive damages awards and the nonpecuniary loss.

Keywords: Punitive damages, value of statistical life, deterrence

JEL Classifications: K13, K0, J17

Accepted Paper Series