Deterrence in Personal Injury Cases

19 Dec Deterrence in Personal Injury Cases

The twin purposes of tort law are compensation on the one hand and deterrence of future wrongdoing on the other.

Yet in Texas, the law of damages gives deterrence a back seat. When a person sustains a loss as a result of another’s wrongful conduct, that person is entitled to damages in an amount sufficient to compensate the injured person for that loss. When the wrongful party’s conduct is bad enough, punitive damages (generally) can also be awarded; only then is the deterrence value of the damages award taken into account.

However, Texas law limits the availability of punitive damages in at least two ways.

First, punitive damages are only available in instances of egregious conduct—in personal injury cases, a defendant must have acted with malice or despite the knowledge that their actions involved an extreme degree of risk. Second, a plaintiff seeking punitive damages must prove the defendant’s conduct by clear and convincing evidence, rather than merely a preponderance (more likely than not) standard. The effect of these two factors is that a plaintiff is limited in seeking, and a jury is limited in awarding, damages for the purpose of deterring future wrongdoing.

By making it more difficult to award deterrence damages, the law makes deterrence of future wrongdoing more difficult, and thereby undermines deterrence itself.

Granted, of course, the awarding of compensation can in and of itself have a deterrent effect. It is not as though an award of damages can either compensate or deter, but not both. But it is easy to overvalue the deterrent effect of compensatory damages. In an “normal” personal injury case, it’s unlikely the plaintiff is going even to be able to ask a jury to award deterrence damages. A judge might let the plaintiff’s attorney talk to the jury about “sending a message,” but a judge is just as likely to disallow such a statement, or even forbid the attorney before trial from making such a statement at all. Even if an attorney is permitted to talk about sending a message, there won’t be a line on the jury charge asking what amount of damages is necessary to prevent the defendant or other people from committing similar negligent acts in the future.

The solution to this problem is straightforward: allow deterrence damages on the jury charge in cases of simple negligence.

One might object a second time and point out that it’s going to be the insurance company paying the damages, not the defendant, so deterrence damages will not have their desired effect. This may be true, but no more so than for damages granted to compensate but with the secondary effect of deterrence.

More importantly, we could expect at least in part that such damages would have the desired effect despite the ubiquity of insurance coverage. Insurers could begin to write policies that deny coverage for deterrence damages, or that separate out coverage for compensatory damages and coverage for deterrence damages (though this could have the unintended effect of limiting coverage in “normal” car crash cases, the legislature could close this gap by denying limitations of coverage for consumer motorists and mandating minimum deterrence coverages for commercial drivers).

In the specific case of deterrence damages for automobile crashes, any rise in insurance rates would ironically actually further the purpose of deterrence damages, since rising insurance rates are the only way that deterrence damages would be “felt” by consumers. But if the insurance market is working correctly, this should also create an incentive for insurers to reward safer drivers and punish less safe ones. This in turn would create an incentive for more dangerous drivers to drive more safely in the future.

In a future post, I plan to discuss further exactly how damages deter bad conduct.