Hedonic damages

Hedonic Damages, an economic term of art, refers to loss of enjoyment of life damages, the intangible value of life, as distinct from the human capital value or lost earnings value.

History

The term achieved reknown when coined by Stan V. Smith (economist) during his testimony in the case of "Sherrod v. Berry" (7th Cir. 1985). It has since been in widespread use in subsequent legal decisions, in law review articles, and in law and economics articles nationwide. See for example Professon Cass Sunstein's University of Chicago Law & Economics, Olin Working Paper No. 340, July 2007.

Application

Hedonic damages, the loss of the value of life, are not allowed in death cases in the great majority of the states. Some states do allow recovery in wrongful death cases, including New Hampshire, Georgia, Arkansas, Connecticut, Hawaii, and in Federal Section 1983 civil rights violation actions. They are allowed in almost every state in a non-fatal injury case. Based on "William Daubert et al v. Merrell Dow Pharmaceuticals, Inc.", and other admissibility tests, many but not all jurisdictions allow economic expert witness testimony on hedonic damages. For example, the Nevada Supreme Court unanimously approved of such testimony in Banks v. Sunrise Hospital, 120 Nev. Adv. Op. No. 89,102 P.3d 52 (2004). Similarly, the 4th Appellate District in Ohio allowed such testimony based on Daubert in Lewis v. Alfa Leval,128 Ohio App.3d.200 (1998). The measurement of hedonic damages is based on some 40 years of extensive, well-accepted, peer-reviewed, economic research on the value of a statistical life (VSL). This measurement is controversial among forensic economists. Many courts nationwide have allowed such testimony but judges have significant discretion as to its admissibility. Economists generally agree that the VLS is in the $4 million to $5 million dollar range. This value is an average of many published results based on economic research using the Willingness-to-Pay model(WTP).

Hedonic damages also can apply in cases that involve no injury. Cases involving inmates wrongfully imprisoned have been won with Hedonic Damages approaches. Such were the plights of two former inmates, William Gregory and David Pope, convicted and later exonerated on rape charges. William Gregory, who served seven years in a Kentucky prison, received a $4.5 million dollar settlement, while David Pope, who served 15 years in Texas, received $385,000. While the inmates were free, according to David Hunt, another inmate later freed after serving 18 years, "we're still living the nightmare every day". Hedonic damages attempt to compensate for that suffering with settlements. [Paul M. Barrett, "The Price of Pleasure" (1988, Dec. 12). Wall Street Journal, p. A1.]

A person injured after falling from a defective chair was able to recover hedonic damages. ["Hunt v. K-Mart Corp.", 981 P.2d 275 (Montana 1999), found at [http://daviddfriedman.com/laws_order/laws_order_chapter_9/links/ch_9_100_case_hedncdam.htm David Friedman citations page] . Accessed February 21, 2008.]

Controversy

As with any idea, the concept of hedonic damages has its doubters. Hedonic damages testimony is sometimes disallowed based on the precedent set in the U.S. Supreme Court case of "William Daubert et al v. Merrell Dow Pharmaceuticals, Inc." A reasonable explanation of the test outlined in this decision can be seen in the opinion of the judge in another case where hedonic damages were used, "Smith v. Ingersoll-Rand, Inc." While the judge allowed Smith to testify as to the concept, specific numbers applicable to the plaintiff were not allowed. In this decision, the judge ruled that hedonic damages falls in to the realm of a social science which doesn't lead itself well to scientific evaluation. While the judge ruled against specific hedonic damages tailoring in this case, the New Mexico Supreme court has left it to trial judges to decide on admissibility on a case by case basis. See "Romero v. Byers" (1994) and "Sena v. New Mexico State Police" (1995). In Sena the court concluded that “where an expert witness has been properly qualified, it is not improper for the trial court to permit an economist to testify regarding his or her opinion concerning the economic value of a plaintiff’s loss of enjoyment of life.” In "Couch v. Astec Industries, Inc. et al." the New Mexico Court of Appeals further defined the allowable contours of expert testimony on hedonic damages to include testimony on the economic research on the value of a statistical life as well as the broad areas of the human experience to be considered by the jury in determining such damages.

There is significant scholarship endorsing hedonic damages in wrongful death cases. [Andrew J. McClurg, "It's a Wonderful Life: The Case for Hedonic Damages in Wrongful Death Cases", 66 Notre Dame L. Rev. 57 (1990-1991), found at [http://law.fiu.edu/faculty/Wonderful_life.pdf Wrongful death law review article] . Accessed February 21, 2008.] [See also [http://daviddfriedman.com/laws_order/laws_order_chapter_9/links/ch_9_100_case_hedncdam.htm David Freidman citations page] , citing Andrew Jay McClurg, "supra"; Paul H. Rubin, "The Pitfalls of Hedonic Value Use, Nat'l L.J., January 16, 1989, at 15; and Ted. R. Miller, Willingness to Pay Comes of Age: Will the System Survive? 83 Nw.U.L.Rev. 876 (1989). Accessed February 21, 2008.] . Further, Hedonic Damages were allowed as an element of recovery in the September 11, 2001 Victim Recovery Fund.Fact|date=March 2008

Willingness-To-Pay Model

The WTP approach is based on measuring what people pay for safety that results in small reductions in their risk of death. For example, if average people are willing to pay $25 for a carbon monoxide detector that stands a one in two hundred thousand chance of saving their life, the WTP model would imply that such purchasers value their life at $5 million ($25 times 200,000). Economists generally use circumstances involving small risk reductions, recognizing that measuring WTP using larger risks will significantly increase the value of a statistical life. [Bill Marsh, "The value of experience lost", "New York Times", September 9, 2007, p. A13.]

References

See also

* Damages
* Measure of Damages (under English law)
* Pro-rata
* Punitive damages
* Pure economic loss