Is Injury Compensation Excessive?

There is widely perceived to be a public liability crisis in Australia. This paper analyses whether court awards for injuries are excessive. The paper has two main parts. The first part outlines a normative basis for the sizes of awards based on the principles of welfare economics and the amounts that individuals would be willing to pay to avoid injuries. It shows the kinds of compensation sums that would be involved for 28 typical injuries ranging from broken arms and legs to quadriplegia and severe brain damage. The second part of the paper analyses 397 court awards for injuries greater than $250 000 in NSW from 1991 to mid-2002, for which award details were readily available. This includes 101 awards for traffic accidents, 64 awards for workers compensation, and 27 awards for personal injury. The paper concludes that court awards are generally not excessive. JEL Classification: