Stern and Kadane, ‘Indemnity for a lost chance’

ABSTRACT
Civil liability for a lost chance occurs when a tortious action changes the probabilities of the outcomes that can be obtained by the victim. In such situations, the most commonly referenced rule of quantification is that of proportional damages. Based on this rule, the literature has proposed several formulae for quantifying damages. However, these formulae have limited applicability. For instance, they are inappropriate when the victim’s chance has more than two possible outcomes or when the victim can make a choice which would influence her outcomes. Also, the formulae have seldom been derived from legal principles, which makes it hard to choose among them when they disagree. Instead of discussing specific formulae, we propose a principled approach to quantifying damages in lost chances. We present several qualitative legal questions regarding how to quantify damages and show that the answers lead to precise and general rules for damage quantification. These rules generalize the formulae that were previously proposed. Furthermore, our approach separates legal considerations from the quantitative issues involved in damage quantification.

Rafael Bassi Stern and Joseph Born Kadane, Indemnity for a lost chance, Law, Probability and Risk, https://doi.org/10.1093/lpr/mgz010. Published: 20 June 2019.

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