What are “Hedonic Damages,” and Should They Matter in Litigation?

What are “Hedonic Damages,” and Should They Matter in Litigation?

What are “Hedonic Damages,” and Should They Matter in Litigation? 150 150 Avalon Health Economics LLC

In recent years there has been a resurgence in what are called “hedonic damages,” especially in cases involving personal injury and product liability. The concept of hedonic damages is based on the calculation of the total estimated value of a human life (i.e., as might normally be calculated in a wrongful death case), “weighted” in such a way to reflect the “loss of enjoyment of life.”[1] Thus, these types of damages can be exceptionally large in cases where plaintiffs argue high levels of disability.

However, there are several important limitations to this approach. The main limitations of hedonic damages calculations are as follows. First, these calculations assume that one can statistically and accurately calculate the monetary value of a human life, but the literature is far from settled as to what this number should be, and existing estimates are highly susceptible to even small changes in assumptions.[2] Second, these calculations largely ignore the complexities and advances in the field of health outcomes research, the focus of which over the past two decades has been to assess the complexities of measuring quality of life (“QoL”) in healthy individuals and those with health problems and disabilities.[3] Third, decrements in QoL must be “anchored” in relevant populations, must be compared to “real-world” baseline data, and must consider QoL levels prior to an index incident.[4] Fourth, QoL estimates should be “assigned” by experts externally, as literature shows that individuals (even within the same group) often value QoL and health states differently (e.g., individuals with disabilities often value their decrement in QoL significantly less than healthy individuals subjected to hypothetical scenarios).[5]

In sum, there are many critical limitations that must be considered when plaintiffs are claiming hedonic damages, and extra steps are required to determine the reasonableness of such claims. The literature supporting hedonic damages is mostly based on economic studies that have largely ignored the large body of research in health outcomes research from the past two decades, research that underscores the complexities in assigning QoL decrements to disabilities.

(By John E. Schneider, PhD, and Cara M. Scheibling, MBA) (2023).

1) See generally S. Smith, “Hedonic Damages: Evaluating Loss of Enjoyment of Life,” (Chicago: Smith Economics Consulting Group, 1994).

2) See generally A. Blomqvist, “Defining the value of a statistical life: a comment,” J Health Econ 21, no. 1 (2002); E. Keller et al., “How Much Is a Human Life Worth? A Systematic Review,” Value Health 24, no. 10 (2021); W.K. Viscusi and J.E. Aldy, “The Value of a Statistical Life: A Critical Review of Market Estimates Throughout the World,” The Journal of Risk and Uncertainty 27, no. 1 (2003); P. Dolan et al., “Valuing lives and life years: anomalies, implications, and an alternative,” Health Econ Policy Law 3, no. Pt 3 (2008).

3) See, for example, P.M. Fayers and D. Machin, Quality of Life: The Assessment, Analysis, and Reporting of Patient-Reported Outcomes (3rd Edition) (Oxford, UK: Wiley Blackwell, 2016); P. Kamudoni, N. Johns, and S. Salek, Living with Chronic Disease: Measuring Important Patient-Reported Outcomes (Singapore: Spinger Nature, 2018); R.L. Kane and D.M. Radosevich, Conducting Health Outcomes Research (Sudbury, MA: Jones & Bartlett Learning, 2011).

4) See generally Fayers and Machin, Quality of Life: The Assessment, Analysis, and Reporting of Patient-Reported Outcomes (3rd Edition); A. C. Scholten et al., “Assessment of pre-injury health-related quality of life: a systematic review,” Popul Health Metr 15, no. 1 (2017); P. F. Stalmeier, “Discrepancies between chained and classic utilities induced by anchoring with occasional adjustments,” Med Decis Making 22, no. 1 (2002).

5) See generally N. F. Boyd et al., “Whose utilities for decision analysis?,” ibid.10 (1990); J. Brazier et al., “Should patients have a greater role in valuing health states?,” Appl Health Econ Health Policy 4, no. 4 (2005); R. Formisano et al., “Quality of life in persons after traumatic brain injury as self-perceived and as perceived by the caregivers,” Neurol Sci 38, no. 2 (2017); E. Nord, “The significance of contextual factors in valuing health states,” Health Policy 13, no. 3 (1989); Y. Peeters and A. M. Stiggelbout, “Health state valuations of patients and the general public analytically compared: a meta-analytical comparison of patient and population health state utilities,” Value Health 13, no. 2 (2010); A. M. Stiggelbout and E. de Vogel-Voogt, “Health state utilities: a framework for studying the gap between the imagined and the real,” ibid.11, no. 1 (2008); David Wasserman, “Assessing health-state utility: is there a uniquely privileged perspective?,” Journal of Law and the Biosciences 7, no. 1 (2020).