LIABILITY FOR LOST CHANCES: WHAT COMPENSATION IS DUE?
DISTINGUISHING BETWEEN THE (EX ANTE) RISK OF INJURY AND THE (EX POST) PROBABILITY OF CAUSATION
The following example is paradigmatic:
The claimant required urgent surgery, which -- if performed properly and on time -- would have given her a 75% chance of recovery. The doctors negligently delayed the surgery. The delayed surgery was performed impeccably, but it promised the claimant only a 25% chance of recovery. Ultimately, the claimant did not recover.
The claimant cannot prove causation and attempts to recover compensation under the lost-chances doctrine. Under this doctrine, courts uniformly award the claimant 50% of her total damage.
This approach is wrong: the claimant should recover 2/3 of her damage, not just 50%.
See, for example, Mays v. United States, 608 F. Supp. 1476 (D.C. Colo. 1985) (upon finding that medical malpractice reduced the patient's chances of recovery from 40% to 15%, the court reasoned that the damage was 25% of the patient's total loss); Herskovits v. Group Health Cooperative of Puget Sound 664 P.2d 474 (Wash. 1983) (holding a 14% reduction, from 39% to 25%, in the decedent's chance for survival as sufficient evidence to allow the case to go to the jury); Alberts v. Schultz, 975 P.2d 1279, 1287 (N.M. 1999) (holding that if medical malpractice reduced the patient's chance of survival from 50% to 20%, that patient's compensation would be 30% of the value of his or her life); Jorgenson v. Vener, 616 N.W.2d 366, 372 (S.D. 2000) (if instead of completely eliminating the chance of recovery, the physician's negligence merely reduced the chance of recovery from 40% to 20%, then the value of the lost chance would be 20% of the value of a complete recovery).
For reasons provided below, the claimant should have recovered 29% of the damage in Mays; 19% of the damage in Herskovits; 37.5% of the damage in the Alberts example; and 25% of the damage in the Jorgenson example.
Take a person who sustains injury after being wrongfully exposed to a risk of sustaining that injury. Before the wrongdoing, this victim's probability of sustaining the injury equaled 1-p, which is parallel to her probability of remaining uninjured (p). After the wrongdoing, the victim's probability of sustaining the injury became 1-q, which is parallel to her probability of escaping the injury (q). Because the victim actually sustained the injury, her case falls into the 1-q category. This statistical category comprises two jointly exhaustive and mutually exclusive scenarios that reflect the victim's initial position. In the first scenario, the victim sustains the injury irrespective of the wrongdoing. Under this scenario, the victim was doomed to sustain the injury, so that the wrongdoing made no impact on her well-being. As already indicated, the probability of that scenario equals 1-p. In the second scenario, it is the wrongdoing that causes the victim's injury. Under this scenario, the victim would have remained uninjured had she not been exposed to the wrongdoing. The probability of this scenario equals (1-q)-(1-p), that is, p-q. This ex ante probability represents the reduction in the victim's chances of remaining uninjured, as effected by the wrongdoing.
Now consider the ex post probability of the scenario that the wrongdoing was the actual cause of the victim's injury. This probability is represented by the fraction of scenarios featuring a victim who could not sustain her injury without being subjected to a wrongdoing in the more general cluster of cases that feature an injured victim, a wrongdoing, and the exhaustive variety of causal factors that could inflict the same injury on the victim. The above fraction of scenarios equals p-q. The cluster of cases covering all possible scenarios equals 1-q. The ex post probability of the scenario in which the wrongdoing actually inflicts the victim's injury therefore equals (p-q)/(1-q).
As already mentioned, the victim's (ex ante) risk of sustaining injury as a result of the wrongdoing equals p-q. Consequently, in cases in which the victim actually sustains injury, the (ex post) probability of causation -- that is, the probability of the allegation that factually attributes the injury to the defendant's wrongdoing -- would generally be higher than the (ex ante) risk of injury. This would be so because, on numerous occasions, a wrongdoing increases the victim's probability of becoming injured without transforming this prospect into empirical reality. In any such case, since the wrongdoing still leaves the victim with chances of escaping the injury, 0<q<1. Hence, (p-q)/(1-q)>p-q. The two probabilities would be equal only when q=0, that is, when the wrongdoing totally eliminates the victim's chances of escaping the injury. In q=0 cases, the risk of injury and the probability of causation would concur and would equal p.
The courts' approach is detrimental to society.
Using the same notation, let p and q denote, respectively, the victim's chances of remaining uninjured before and after the wrongdoing. Allow D to denote the average amount of damage that the wrongdoing inflicts in the long run of cases, and let T denote the total number of cases in which the risky activity takes place. The ideal compensation that the legal system should exact from the wrongdoer would thus equal (p-q)DT.
In reality, however, only injured victims can successfully sue the wrongdoer.
Therefore, the number of cases in which the wrongdoer would have to pay compensation would equal (1-q)T. The wrongdoer's compensation duty would thus be below the optimal. Using the probability of causation as an award-multiplier would eliminate this shortfall. As already established, the probability of causation equals (p-q)/(1-q). The total amount of the wrongdoer's compensation duty would consequently be [(p-q)/(1-q)]DT(1-q), that is: (p-q)DT.
This compensation duty equals the losses inflicted by the wrongdoer. It would therefore optimally deter prospective wrongdoers (and would also promote corrective justice).
Indeterminate Causation and Apportionment of Damages, 23 Oxford Journal of Legal Studies 667 (2003) (with Ariel Porat) download
TORTS AND INNOVATION
This Essay exposes and analyzes a hitherto overlooked cost of the current design of tort law: its adverse effect on innovation. Tort liability for negligence, defective products, and medical malpractice is determined by reference to custom. We demonstrate that courts’ reliance on custom and conventional technologies as the benchmark of liability chills innovation and distorts its path. Specifically, the recourse to custom taxes innovators and subsidizes replicators of conventional technologies. We explore the causes and consequences of this phenomenon and propose two possible ways to modify tort law in order to make it more welcoming of innovation.
Torts and Innovation, 107 Michigan Law Review 285-315 (2008) (with Gideon Parchomovsky) download
TRESPASS REMEDIES
This Essay addresses an anomaly in trespass law. Trespass law is generally understood as the paradigmatic example of property-rule protection: an owner can obtain an injunction against the trespasser and have him removed from her land. The property-rule protection enjoyed by the owner protects her right to exclude others and to set the price for the use of her property. However, the property-rule protection only exists ex ante: it avails only against imminent or ongoing trespasses. Ex post, after a trespass ends, the owner can only recover compensation measured by the market value of the unauthorized use, i.e., the going rent. This liability-rule compensation dilutes the ex ante property-rule protection of ownership. Effectively, it grants trespassers a call option on others’ property, creating a mismatch between rights and remedies.
To remedy this mismatch, we introduce the concept of “propertized compensation”—a damage measure that sets compensation equal to the owner’s pre-trespass asking price. We contend that propertized compensation should become the primary remedial option in trespass cases. The use of this measure will reinstate the owner’s position as a price maker, entitling her to recover the amount that she would have agreed to accept ex ante in a voluntary exchange. We further argue that owners who cannot produce evidence regarding their pre-trespass asking price (as well as owners who prefer not to seek propertized compensation) should be entitled to seek disgorgement of the trespasser’s profits. Finally, we claim, contra the extant regime, that market-value compensation should only be used in the exceptional cases of trespass by necessity, media trespass, and good faith encroachments. In all other cases, it should only be awarded if the owners specifically ask for it.
Reconceptualizing Trespass, 103 Northwestern University Law Review 1823-1863 (2009) (with Gideon Parchomovsky) download
LIABILITY FOR FUTURE HARM
This Article considers the possibility of imposing liability in torts for a wrongfully created risk of future harm. We examine the American and English court decisions pertaining to this issue and consider whether a probability-based compensation for the victim’s expected—albeit not yet materialized—harm is just and efficient. We demonstrate how the virtues of a legal regime that allows a tort victim to recover compensation for her expected harm overshadow its vices. We conclude that a person’s risk of sustaining harm in the future should be actionable whenever the risk is substantial. We further conclude that it should be left to the victim to decide whether to recover for his or her expected harm, or else wait and see if the risk materializes and recover only if it does. We observe that allowing victims to make this choice might create a collective action problem. Because expedited compensation for a victim’s expected harm erodes the wrongdoer’s ability to compensate future claimants, victims would opt for an early recovery for expected harm even when their substantive remedial preferences are different. We demonstrate, however, that this problem can be resolved.
Liability for Future Harm (with Ariel Porat), in Richard S. Goldberg, ed., Perspectives on Causation (Hart Publishing, 2010) (forthcoming) download