STATISTICAL ASSESSMENT OF DAMAGES IN BREACH OF CONTRACT LITIGATION

A recent suit in U.S. District Court involved a breach of contract by a third-party administrator of workers' compensation claims. Applying a theory of lost economic opportunity, the plaintiff's attorney retained experts in claims adjustment, insurance, and statistics to assess damages. A stratified, systematic random sample was drawn from the population of claims and reviewed for processing and costs. Several ratio estimators were considered in estimating total damages. This article describes the sampling design and estimation methods and discusses how these procedures and results were received by the court. More aggressive application of the "loss of economic opportunity" or "loss-of-chance" doctrine in future cases will expand the scope of actions for which statistical assessments of damage may be indicated.