The Mitigation of Emotional Distress Damages
28 Pages Posted: 20 Jun 2001
In what may be a unique exception to the mitigation requirement, plaintiffs claiming damages for emotional distress need not show that they have taken any steps to mitigate their damages. The absence of mitigation rules creates a previously unrecognized tendency towards overcompensation in emotional distress claims. The mitigation rule (also known as the doctrine of avoidable consequences) requires injured parties to take all reasonable measures to minimize their damages. Mitigation is a well-established and universal principle of damages; it limits recovery in every conceivable type of action for money damages. The mitigation requirement serves to limit plaintiffs' ex post moral hazard, which arises because defendants serve as insurers of plaintiffs' losses. However, despite the rapid expansion of liability for emotional distress, courts have failed to apply the mitigation rule to such damages. The absence of mitigation rules for emotional distress creates particular problems of moral hazard that courts have not yet considered. Any evaluation of the advisability of recovery for emotional distress must take into account the absence of the traditional legal mechanism for limiting plaintiffs' moral hazard. Perhaps one reason mitigation has not been applied to emotional distress is the difficulty of crafting a workable definition of what such mitigation would look like. Some obvious definitions of mitigation, like seeking psychiatric treatment, would likely create more problems than they would solve. Thus measures to limit moral hazard in emotional distress must take the form on limitations on the scope of recovery or the amount of liability.
Keywords: emotional distress, mitigation, avoidable consequences, moral hazard, damages, remedies, nonpecuniary injuries
JEL Classification: K00, K13
Suggested Citation: Suggested Citation