It’s Time to End the Use of Race & Gender Statistics in Damage Award Calculations

By Joe Scanlon*

There are well-documented inequalities in the American legal system. For instance, numerous studies indicate that Black Americans are arrested more often and receive longer sentences than their White counterparts. Other legal inequalities, however, receive less attention but are just as prevalent. In civil litigation (e.g. personal injury lawsuits) for instance, White male plaintiffs are awarded more monetary damages on average than similarly situated people of color and women. This statistic holds true whether the damages are determined by a jury or via settlement. 

A Look Behind the Curtain

Today, roughly 95% of personal injury claims result in confidential settlements, and race and gender statistics are frequently used to inform and guide settlement discussions. Unfortunately, most settlements are negotiated behind closed doors with strict confidentiality agreements, so the exact terms reached by the parties often remain unknown. This secretive process deprives us of important data on just how much race and gender can impact the terms of a settlement. Nonetheless, many trial lawyers and academics acknowledge that plaintiffs who are women and people of color receive less favorable settlements than their White male peers, and the use of race and gender based statistical tables is at least partially to blame.  

Every now and then a case comes along that offers a direct look at how race and gender affect settlement and damage calculations. In 2014, a four-year-old Hispanic boy was diagnosed with significant brain damage due to the lead painted walls of his family’s apartment. The boy’s family sued the landlord, and the case went to trial. Because of the victim’s age, the family sought damages based on the boy’s loss of future earning capacity. An accountant testifying on behalf of the boy estimated a lost future earning capacity of $3.4 million because both of the boy’s parents were professionals who held Master’s degrees. By contrast, an accountant testifying on behalf of the landlord estimated the boy’s lost future earning capacity at merely $1.5 million. The accountant arrived at the lower figure because the boy was Hispanic, and therefore, only had a 7.37 percent chance of obtaining a Master’s degree like his parents. In other words, the boy’s estimated future earnings capacity was reduced by almost $2 million simply because of his race/ethnicity.  

Gender can be a major factor in damage calculations as well. In a tragic case from 1996, a six-year-old girl and an unborn male fetus were killed in an automobile accident. Both parties to the ensuing lawsuit determined that the male fetus was entitled to a higher damage award than the girl, despite testimony indicating that the girl had “a level of intellectual ability and behavior that surpassed that of most other students,” in addition to having a college fund already set up in her name. Moreover, the male fetus’s mother had not completed college and the father was unknown, according to court records. Nonetheless, because he was a male, the unborn boy was projected to earn more over his lifetime than the exceptionally bright girl. 

The Process of Calculating Damages 

The aforementioned cases offer a rare look at a corner of our legal system that explicitly uses race and gender to determine how much victims (or their families) can receive as compensation for serious injuries or death. In these types of cases, experts called Forensic Economists are used to determine or estimate the potential income the victim could have made had they not been injured. The experts then provide recommendations to insurance companies in pre-trial settlement negotiations, or they testify before a jury in cases that go to trial. 

In their analyses, these experts utilize actuarial tables for both adult and child plaintiffs to predict future income loss. A 2009 survey by the National Association of Forensic Economics (NAFE) showed that 43.6% percent of the respondents used both race and gender data when projecting lost wages. Moreover, 92 percent said they considered gender when projecting the annual wage for an injured child. For adult plaintiffs, experts take into account education and employment history, but they may also use race and gender statistics. For children (or those who lack a work/educational history) race and gender stats play a much more prominent role. First, the stats are used to predict educational attainment based on the child’s gender and race. Next, the stats are used to predict income for someone of the same race, gender, and predicted education level. 

At first glance, the use of race and gender-based statistics may appear to be a neutral, data-driven approach, and defenders of the tactic say it is the most accurate way to calculate the losses incurred after an injury. In reality, however, the practice unjustly devalues the lives of racial minorities and women. Women and people of color continue to earn less income in our society, so the statistics used to estimate lost future income create an inherent disadvantage in settlement discussions and at trial for these demographics. For example, statistically a black female with a bachelor’s degree is expected to make $1.24 million dollars during her life versus a white male’s earnings of $2.28 million. Therefore, in a calculation of lost potential earnings, a Black woman starts settlement negotiations (or enters trial) $1 million behind a White man, regardless of her station or actual income earning potential.

Ultimately, the disparities that exist in race and gender-based data are the product of decades of intentional economic subjugation of these groups. That is, the data doesn’t reflect a neutral assessment of earning capacity, but rather the impact of discriminatory policies and barriers that racial minorities and women confront on a daily basis. Indeed, the use of race and gender data not only enforces existing discrimination, but it also perpetuates current disparities.

Legislating an End to the Practice

Because the practice of using race and gender statistics is so ingrained in modern litigation, the practice can likely only be stopped through legislation that bans it. Although there is currently no such bar to the use of gender and racial statistics in calculations of potential damages, the United States has banned the use of race and gender stats in some other calculations, so an act of legislation is a viable option. 

Additionally, although no law exists at the Federal level, some states have taken steps to eliminate the practice of using race and gender stats to calculate damages. In 2019, California enacted SB 41, a bill which prohibited “the estimation, measure, or calculation of past, present, or future damages for lost earnings . . . from being reduced based on race, ethnicity, or gender.” The sponsor of the bill, Senate Majority Leader Bob Hertzberg (D-Van Nuys), commented that “[t]his practice perpetuates systemic inequity, and it tells companies that if you do bad things in poor communities with disadvantaged populations, your financial liability will be smaller.” 

Likewise, New Jersey has a similar bill in the works. In December 2021, the New Jersey assembly and Senate panels advanced a bill that would bar reductions in damages paid for lost earnings based on race, gender, ethnicity, sexual orientation, and gender expression or identity in personal injury and wrongful death cases. 

Moving forward, lawyers and advocates of a ban on the use of gender and race statistics in damage calculations should push for similar changes at both the state and Federal levels. As the judge in the case of the four-year-old Hispanic boy referenced above noted, “[r]ace and ethnicity are not, and should not, be a determinant of individual achievement. To support such a proposition distorts the American Dream . . .  A traditional, automatic, unthinking approach by experts in the field can no longer be tolerated.”

*Joe Scanlon, University of Minnesota Law School Class of 2023, JLI Vol. 40 Staff Member