ECONOMIC DAMAGES IN NEVADA:

THE LOSS OF SOCIETY AND COMPANIONSHIP

AND OTHER ECONOMIC DAMAGES

 

By Stan V. Smith, Ph.D.

Since Banks v. Sunrise Hospital, 120 Nev. Adv. Op. No. 89, 102 P.3d 52 (2004), my testimony on the loss of enjoyment of life in personal injury has been accepted by Nevada courts many dozens of times.   Perhaps the most notable instances of the impact of this testimony were in the Endoscopy cases where I testified to compensatory and punitive losses resulting in verdicts that ranged into the several hundred million dollars. Awards for the loss of enjoyment of life in Nevada, as in most states, are independent of pain, suffering and mental anguish.

Over the past decades, courts around the nation have recognized that the peer-reviewed value-of-life literature in economics has developed to the point where it can provide useful guidance to jurors in assisting them in the valuation process for Loss of Enjoyment of life. Hence I have testified on the loss of enjoyment of life damages in personal injury and wrongful death cases not only in in Nevada, but also in most other states and most Federal Circuits as well.   See Stan V. Smith “Hedonic Damages in the Courtroom Setting – A Bridge Over Troubled Waters,” Journal of Forensic Economics, Vol. 3, No. 3, 1990, pp. 41-49 and Smith, Stan V., “Hedonic Damages in Personal Injury and Wrongful Death Litigation,” in Gaughan, Patrick A. and Robert J. Thornton (Eds.), Litigation Economics, Greenwich: JAI Press, 1993.

Economic testimony based on peer-reviewed economic literature can now also be provided to value other losses in Personal Injury and Wrongful Death cases, and also losses in Credit Damage cases.

In Personal Injury and Wrongful death cases, losses to close family members:

(a) The loss of Society and Relationship

(b) The loss of Advice Counsel, Guidance Training and Instruction

(c) The loss of Accompaniment

In Credit Damage cases:

(a) The loss of Credit Expectancy

(b) The loss of Enjoyment of Life in Credit Damage Cases.

The evidentiary approach to measuring the loss of Enjoyment of Life, often called Hedonic Damages in economic literature, is arrived at by subtracting human capital values from whole life values. The whole life values are obtained using the value-of-life results based on the willingness-to-pay approach. This approach measures the costs of investing in safety equipment and safer consumer behavior, as well as inducements provided to workers who undertake risk in the workplace. The literature on the willingness-to-pay and the willingness to accept payment is extensive and one of the most settled areas of economic research showing that the value of a statistical life is, conservatively estimated, in the $4.5 to 7.0 million dollar range.

This same approach based on the value of a statistical life can be used to value the loss of Society and Relationship to close family members in fatal and non-fatal personal injury. If a person places a smoke detector in his own bedroom, he is expressing a lower-bound to the value of his life in an amount equal to the cost of the detector (purchase price, installation, batteries, etc.) divided by the reduction in the risk of death. If, for example, the detector costs $25 dollars and reduces the risk of death by 1 chance in 200,000, then the value of life expressed is $5.0 million.

Now, suppose that a detector is placed in the bedroom of a close family member such as a child by a parent who seeks to preserve the society and relationship with that child? What value of life is expressed? The same statistically average value, $5.0 million. But this value can be used to value the relationship to the family of the child’s life. This conclusion has been arrived at by Ted. R. Miller “Willingness to Pay Comes of Age: Will the System Survive?” Northwestern Law Review, Vol 83, 1989, pp. 876-907: “When … individual’s survivors may recover for their own loss of enjoyment, whole life costs can again be used to estimate the appropriate level of compensation.”   Also Lauraine G., and Daniel M. Violette in “The Relevance of Willingness-To-Pay Estimates of the Value of a Statistical Life in Determining Wrongful Death Awards,” Journal of forensic Economics, Vol. 3, No. 3, 1991, pp. 75-89 come to a similar conclusion: “We conclude that the WTP estimates are potentially useful when the definition of compensation involves putting a dollar figure on non-financial losses to the deceased or to survivors. I have summarized this approach in “The value of Life to Close Family Members: Calculating the Loss of Society and Companionship,” American Rehabilitation Economics Association 1997 Monograph.

As an example of the loss of Society and Companionship due to the death of 12 year old girl, survived by her parents, the losses are calculated through the life expectancy of the parents, losses can easily range to from $1,000,000 to $2,000,000 per parent depending on the life expectancies and the parents’ testimony as to the impact of the loss on their ability to derive value and satisfaction from their quality of life.

Peer-reviewed economic literature can also be used to measure an expanded view of the loss of Household and Family management Services when a family member is injured or killed, services beyond the traditional physical chores such as scrubbing floors and cooking. For a discussion of the expanded view of Household Services, see Smith David A., Smith, Stan V., and Uhl, Stephanie R., “Estimating the Value of Family Household Management Services,” Forensic Rehabilitation and Economics, 2010. Family members provide valuable Advice Counsel, Guidance Training and Instruction to one another, on a weekly basis, for years. Advice can consist of financial advice, medical advice, relationship advice, career advice, etc.   I calculate such losses provided by family members who are age 25 and older.   When young children are injured, family members frequently testify that that they would have been provided such services when they child reached age 25.   Again, based on peer-reviewed literature, these values can range well into the six figures for each family member.

I also calculate the loss of Accompaniment or the value of time spent. This is independent of the love and affection that is inherent in Society and Relationship. The value of time spent, even with a stranger devoid of any significant affection, is clearly illustrated in what my high school teacher told me was the first great book in English literature: Robinson Crusoe. And convicts express a desire to spend time in a small jail cell with other strangers rather than be alone. In fact solitary confinement is a punishment, one that elderly people eloquently tell me about after they have lost a spouse. The total hours of time that family members, especially spouses, spend with one another adds up over the years; and hence such losses, independent of Society and Relationship, can range well into the mid-six figures.

Credit Damage can arise for many reasons including failure to modify a mortgage, credit error, etc.   The consequences of such damage are far reaching. It can include job loss, loss of home, inability to borrow, etc. Courts are increasingly recognizing that victims also sustain a significant loss of enjoyment of life. Such damages can be calculated independent of an organic or physical injury. Indeed in Wrongful Discharge, Defamation, and Credit Damage, Loss of Enjoyment of Life Damages are routinely calculated. I have also calculated these in instances involving sexual harassment, child porn, sexual predation, and other instances where victims are not physically injured. Again, such losses are independent of physical pain, suffering and mental anguish.

Finally in Credit Damage cases, the reduction in the creditworthiness itself is a measurable damage: the loss of Credit Expectancy. See Smith, David A., Smith, Stan V., and Uhl, Stephanie R., “Credit Damage: Causes, Consequences and Valuation,” in Forensic Rehabilitation and Economics, 2011. The loss of Credit Expectancy is value similar to the loss of other options in life. The inability to obtain a car loan, or even to use a credit card online to buy merchandise, or a plane ticket to visit a sick relative is a significant and measurable loss. Chicago, my hometown, is the world’s center for trading in options. The loss of life options including credit options can range into the six figures. The losses can last years as creditworthiness is not easily restored.

The late Nobel Laureate Gary Becker, and other economists at the University of Chicago, pioneered the use of economic concepts well beyond the original traditional areas of economics. Economists can now use expanded research into the Enjoyment of Life, Society and Relationship, Advice and Counsel, Accompaniment, and Credit Expectancy to provide information to jurors as to how to value such losses. Jurors can greatly benefit from this to provide more rational and enlightened verdicts.

ABOUT THE AUTHOR

Stan V. Smith, Ph. D. is a nationally renowned expert in economics, trained at the University of Chicago, one of the world’s preeminent institutions for the study of economics and the home of the law and economics movement. Testifying nationwide in personal injury, wrongful death and commercial damages cases, Dr. Smith has assisted thousands of law firms in successful results for both plaintiffs and defendants, including the U.S. Department of Justice.

Prof. Smith pioneered the first course in Forensic Economics, at DePaul University, based on his textbook, on Economic Damages. He pioneered the development of “Hedonic Damages” in landmark cases, featured in the ABA Journal, National Law Journal, Front Page Wall Street Journal, and Larry King Live.