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Since the 1980s, tort damages for pain and suffering have excited hue and cry. Twenty-three states currently place statutory limitations on tort damages for pain and suffering: seven states cap damages in general tort cases; an additional sixteen states limit awards solely in medical malpractice cases. Several states also have provisions limiting damages in other, very specific types of tort cases. While some statutes have been invalidated on state constitutional grounds, others have survived judicial scrutiny. At the federal level, both the House of Representatives and the Senate have passed tort-reform bills. Although no compromise legislation has been enacted, this is the first time that both chambers of Congress have passed bills limiting recovery for pain and suffering.

Against this political backdrop, a number of leading legal economists have advanced the "insurance theory" of tort compensation to justify the elimination of tort damages for pain and suffering. The insurance theory's roots lie in neoclassical economics, and it adopts the broader discipline's guiding normative principle of economic rationality to decide the sorts of injuries for which a victim ought to be able to recover damages in tort. The insurance theory's central premise is that accident victims should not recover damages for injuries against which it would not have been economically rational to insure. In other words, if an economically rational agent would not purchase first-party insurance for a certain type of injury, tortfeasors should not be required to pay damages for it. Insurance theorists conclude that rational actors would not insure against nonpecuniary losses, and therefore accident victims should not be able to recover tort damages for them.

Publication Citation

75 Tex. L. Rev. 1567

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Torts Commons