Can Financial Experts Testify On Hedonic Damages?

Over the years, it become quite common for plaintiffs in wrongful death and serious personal injury cases to seek hedonic damages, that is, damages intended to compensate for the loss of enjoyment of life. The theory behind these damages is that life is inherently worth more than just the amounts of money an individual can earn during his or her lifetime.

Courts in many jurisdictions allow plaintiffs to recover hedonic damages in some form. In certain states, hedonic damages are considered part of pain and suffering but more often they're recoverable as a separate component of compensatory damages. Although hedonic damages are widely accepted, the issue of whether financial experts should be permitted to quantify these damages remains controversial.

Valuing A Life

There no question that life has value, but how do you place a dollar amount on that value? The most common method is the use of willingness-to-pay studies. These studies examine statistics about wage premiums for high-risk jobs or expenditures for safety devices, and then use them to extract a value or range of values for an average person life.

For example, suppose that an automobile safety device costs $500 and reduces the chances of accidental death by 1/5,000th. The cost per life saved is $500 divided by 1/5,000th, or $2.5 million. Looking at it another way, if 5,000 people purchased the safety device, one life would be saved at a total cost of 5,000 × $500, or $2.5 million.

Critics argue that the willingness-to-pay methodology is fundamentally flawed. For one thing, the various studies produce a wide range of values, making the selection of a single value highly speculative. More important, there no scientific or logical basis for converting the results of these studies into a value for human life. Consider the following study that values human life based on government expenditures on traffic safety initiatives:

A city is considering two safety initiatives. One would cost $10 million and would save four lives per year. The other would cost $15 million and would save three lives per year. If the city chooses the first initiative does that mean it values human life at $2.5 million rather than $5 million? Or does it simply mean that spending $15 million exceeds its budget?

Proponents of the willingness-to-pay methodology argue that providing a range of values helps keep damages awards under control. It also prevents juries from plucking figures out of thin air.

Courts Weigh In

An article in the Journal of Legal Economics by Thomas R. Ireland (a professor of economics at the University of Missouri“St. Louis) reviews all recent federal and state cases involving expert testimony on hedonic damages. In federal courts, the admissibility of such testimony is essentially a dead issue. The use of statistical methods to value human life is generally deemed to be unreliable, and therefore excludable, under the Daubert standard.

According to the article, a majority of states have no reported opinions addressing hedonic damages. In those that do, some courts permit an expert to explain the difference between hedonic damages and damages for pain and suffering, and even to describe the nature of the statistical value-of-life studies. But the expert can't offer a specific opinion about a plaintiff lost enjoyment of life. A small number of states permit expert testimony on the value of life (or a range of values). But most continue to oppose admission of such testimony.

What Should You Do?

In federal court cases, expert testimony on hedonic damages is almost universally disallowed. If your case is in a state court, consult state law to determine whether expert testimony is allowed and, if so, the scope of such testimony that permissible.