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Steven P. Croley & Jon D. Hanson, The Nonpecuniary Costs of Accidents: Pain-and-Suffering Damages in Tort Law, 108 Harv. L. Rev. 1785 (1995).

Abstract: Conventional wisdom holds that tort awards for nonpecuniary losses are undesirable from an insurance standpoint. Professors Croley and Hanson challenge this wisdom. After providing a critique of several reform proposals predicated on that wisdom and explaining why rational consumers might well demand insurance against nonpecuniary losses, they argue that the empirical evidence upon which the conventional wisdom is largely based is more complicated than previously recognized. In particular, several market impediments seriously limit the extent to which inferences about consumer demand can be drawn from looking solely to first-party insurance markets. With those impediments in mind, however, one can see more clearly the modest market evidence of such demand. Moreover, certain nonmarket evidence further suggests that consumers may demand insurance against nonpecuniary losses, though the market's ability to answer that demand is limited. The tort system, in contrast, has several advantages that may render it a superior institution for providing nonpecuniary-loss insurance.