Thursday, August 1, 2013
W. Kip Viscusi and Benjamin McMichaels, both of Vanderbilt University, have posted on SSRN their paper, "Shifting the Fat-Tailed Distribution of Blockbuster Punitive Damage Awards."
The distribution of blockbuster punitive damages awards has fat tails similar to the distributions of losses from natural disasters. Extremely large awards occur more often and are more difficult to predict than if blockbuster awards were distributed normally. The size and predictability of awards are important factors in the U.S. Supreme Court’s decisions on punitive damages. This article examines the effect of the Court’s decision in State Farm v. Campbell on blockbuster punitive damages awards. State Farm shifts the fat tail of the distribution of blockbuster awards down (or “thins” the tail), which is consistent with a restraining effect on award size. State Farm reduces the size of blockbuster awards in general, but this reduction is most salient in the upper half of the distribution of awards. State Farm also has a negative influence on the probability of exceeding a single digit ratio between punitive and compensatory damages. This article also examines the largest awards and considers why defendants may not pay large punitive damages awards.
Monday, July 29, 2013
Myungho Paik, Bernard S. Black, and David A. Hyman have posted on SSRN their recent article, "The Receding Tide of Medical Malpractice Litigation Part 2: Effect of Damage Caps," which is forthcoming in the Journal of Empirical Legal Studies.
study the effect of damage caps adopted in the 1990s and 2000s on
medical malpractice claim rates and payouts. Prior studies found some
evidence that caps reduce payout/claim, but mixed and weak evidence on
whether caps reduce paid claim rates and payout per physician. However,
most prior studies do not allow for the gradual phase-in of damage
caps, which usually apply only to lawsuits filed after the reform’s
effective date, or only to injuries after the effective date. Once we
allow for phase-in, we find strong evidence that damage caps reduce both
claim rates and payout per claim, with a large combined impact on
payout per physician. The drop in claim rates is concentrated in claims
with larger payouts – the ones that would be most affected by a damages
cap. Stricter caps have larger effects. Some prior studies also find a
large impact of tort reforms other than damage caps. Once we allow for
phase-in, we find that these other reforms have no significant impact
on either claim rates or payout per claim.
A companion article, The Receding Medical Malpractice Part 1: National Trends, is available at http://ssrn.com/abstract=2109679.