Ariel Porat and I have posted a new paper to SSRN, which discusses how courts should determine damages when a wrongful act that harms someone also creates a benefit. Consider two examples:
- A driver causes an accident that injures a pedestrian who then writes a bestseller that details her recovery. Should damages equal medical expenses and the like, or should the court offset the royalties, which, after all, would not have been generated but for the accident?
- A driver causes an accident in the course of swerving to avoid another pedestrian or while rushing an injured person to the hospital. Should the gains to the third party be offset from the damages the driver owes to the victim?
These are not easy questions, and courts give inconsistent answers. We argue that if one focuses on the social costs of the behavior in question, it will often be appropriate to net out the benefits. However, complex problems of causation, measurement, and related issues often suggest that the general bias against offsetting benefits in the law is justified.