Quality Adjusted Life Years as a Way Out of the Impasse between Prevention Theory and Insurance Theory

In a previous paper we have argued that tort law can benefit from the use of Quality Adjusted Life Years (QALYs) in assessing pain and suffering damages for personal injuries. In the current paper we pose that QALYs may be able to solve a problem which exists in the economic analysis of this area of law. The question whether a tortfeasor should compensate non-pecuniary losses is not answered unambiguously in Law and Economics, as shows from the debate between the prevention theory (which argues that the injurer should be liable for immaterial losses) and the insurance theory (which argues that the victim should not receive compensation for such losses). In our view, QALYs are able to bridge the gap between these two theories. They provide a framework for the assessment of pain and suffering damages for personal injuries, which is based on the impact of the health impairment on the victim. This is important for the (primarily legal) objective to provide adequate compensation to the tort victim, and for the (primarily Law and Economics) goal to provide adequate deterrent incentives. A QALY expresses the value of living one year in a certain health condition. Healt