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Keywords:

  • Health states;
  • Injury;
  • Compensation

In Australia, excessive awards in personal damage cases are widely perceived to have created a public liability crisis and cuts in valued services. This paper analyses whether awards for damages are excessive. The paper starts by setting out a normative basis for awards based on welfare economic principles and amounts that individuals are willing to pay to avoid injuries. It then provides estimates of appropriate compensation sums for 27 typical injuries ranging from broken arms to quadriplegia and severe brain damage. There follows an analysis of 192 court awards for injuries greater than $250 000 in New South Wales between 1991 and 2002, including awards for 101 traffic accidents, 64 workers compensation cases, and 27 personal injury cases. The paper concludes that these court awards are broadly consistent with economic estimates for damages and that the awards are generally not excessive.