Research Handbook on the Economics of Insurance Law
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Research Handbook on the Economics of Insurance Law

  • Research Handbooks in Law and Economics series

Edited by Daniel Schwarcz and Peter Siegelman

Insurance law and insurance economics each have long and distinguished scholarly histories, but participants in the two disciplines have not always communicated well across academic silos. The Handbook encourages more policy-relevant insurance economics scholarship and more economically sophisticated legal scholarship by bringing together original contributions from leading scholars in insurance law and insurance economics on a range of issues involving insurance law and regulation.
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Chapter 4: Does the theory of insurance support awarding pain and suffering damages in torts?

Ronen Avraham

Extract

The short answer to the question in the title is ‘Yes’. Here is the long answer. When medical malpractice causes a man to lose his prostate, a woman to lose her womb, or a child to lose her kidney, the victim’s economic loss (actual medical costs and diminished earning capacity) is often relatively small. Yet, few would dispute that the victim has suffered a huge and real loss beyond the economic one. But what kind of a loss? Tort law would identify it as non-economic loss, which serves as a catch-all for many losses such as pain and suffering, mental anguish, emotional distress, and loss of enjoyment of life. Despite the undisputable loss associated with pain and suffering harms, the dominant view in the economic analysis of tort law is that damages for pain and suffering should either be significantly reduced or even entirely eliminated. Indeed, the most prevalent tort reform of the last thirty years has been imposing a cap on pain and suffering recovery. But what makes pain and suffering harm, as opposed to all other kinds of harms, the dominant target of tort reformers? To answer this question, this chapter adopts an economic perspective, exploiting the deep connection between pain and suffering harms and the economic theory of insurance.

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