Damage Caps

One of the most popular areas of reform is to place caps on non-economic damages. These proposals increase the predictability of risk by narrowing the range of awards, but they do not affect the frequency of such awards. Thus their impact on an insurance underwriter’s ability to evaluate and accept risk is limited. A more successful approach, particularly if tied to caps on non-economic damages, would be to limit recovery for non-physical injury to persons who had also received physical injury. A return to this traditional doctrine would do far more to return predictability to the market because it would limit the number of potential plaintiffs a manufacturer and its insurer face.

Along the same lines, damages for "cancerphobia" and other harms not yet suffered should be removed from a system. Both such changes are justified not only as a means to restore some sanity and predictability to the tort and insurance systems, but on contractual grounds. Virtually no private market exists for first party insurance for "pain and suffering". It is not unfair to say that such damages in a tort setting amount to a windfall bonanza for a risk that the plaintiff, ex ante, would choose to bear himself. The ex post facto switching of this burden is unfair to the majority of consumers who eventually pay the bill through higher prices.