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APPENDIX A
BASIS FOR ESTIMATING THE COST
OF SOCIETAL LOSSES

Described below are the data and assumptions underlying the cost estimates for the losses that result from bicycle/motor-vehicle accidents. Most of the cost estimates presented in Table 7 were derived from cost data contained in a recent report on the cost of motor-vehicle accidents (Faigin, 1976). Cost estimates for most losses resulting from traffic accidents differ as a function of the age and sex distributions of the accident population, the average severity of injuries sustained in the accident, and the types of vehicles involved. Therefore, these factors were taken into consideration when estimating the cost of losses resulting from bicycle/motor-vehicle accidents. Information about age, sex, and injury distributions was taken from a recent study of bicycle/motor-vehicle accidents (Cross & Fisher, 1977).

No attempt was made to establish a monetary value for such losses as pain and suffering, grief, loss of personal relationships, and so on.

PRODUCTION LOSSES

When a person is disabled or killed, society is temporarily or permanently deprived of the goods and services that would have been produced by that individual if he had not been killed or injured. One component of lost production is that associated with the person's regular job. This component is referred to as "Market and Market-Proxy Production Losses." A second component -- referred to as "Home, Family, and Community Services Production Losses" -- is the lost production associated with a person's work in the home and community, apart from his income-producing job.

Market compensation (income) was used as the measure of Market and Market-Proxy Production Losses. Since market compensation varies as a function of both age and sex, the age and sex distributions of bicycle/motor-vehicle accident victims were taken into consideration in computing market compensation. The method used to estimate the market compensation losses resulting from fatal accidents is the same as that used by Faigin (1976). This method assumes that production commences at age 20 and continues to age 64. For males and females in each age group, the national average income was increased three percent per year and discounted at seven percent per year through age 64. The totals for each sex and age group were then averaged to produce the average loss figure shown in Table 7. The estimate of the market compensation losses resulting from non-fatal accidents was based on the following parameters:

  • On the average, each non-fatal bicycle/motor-vehicle accident (police reported) results in 4.3 days missed work or school (Cross & Fisher, 1977).

  • The average value of a missed work day is $65 (Faigin, 1976).

  • The average value of a missed school day is $5 (assumption).

  • Of all days lost as a result of bicycle/motor-vehicle accidents, 18% are work days and 82% are school days (Cross & Fisher, 1977).

Based upon the data reported by Faigin (1976), the value of Home, Family, and Community Services Production Losses was estimated to be 8.1% of the value of the Marker and Market-Proxy Production Losses.

MEDICAL CARE COSTS

Faigin compiled data on the medical costs associated with the treatment of persons killed and injured in motor-vehicle accidents. The estimates of medical costs for persons killed in bicycle/motor-vehicle accidents was assumed to be the same as for persons killed in other types of motor-vehicle accidents. However, specific data on the severity of injuries was used in estimating the cost of medical care for non-fatal accidents. The parameters used in computing the cost of medical care for the average non-fatal accident are listed below.

  • About one-third of all bicycle/motor-vehicle accidents result in an injured party being transported to the hospital in an ambulance (Cross & Fisher, 1977).

  • Fifty-three percent of all bicycle/motor-vehicle accidents result in injuries that are treated in a hospital emergency room (Cross & Fisher, 1977).

  • On the average, 1.4 days of hospital care are required as a result of each bicycle/ motor-vehicle accident that is police reported (Cross & Fisher, 1977).

  • On the average, 3.1 visits to a physician are required as a result of each bicycle/ motor-vehicle accident that is reported to the police (Cross & Fisher, 1977).

  • The average cost of a visit to a physician is $20 (estimate based upon discussions with a limited sample of physicians).

The above parameters were used in estimating (for an average non-fatal accident) the cost of emergency transportation, emergency room treatment, hospital care, and physician care.

FUNERAL COSTS

Since future money is worth less than present money, funeral costs experienced in the current year are higher than funeral costs experienced in future years. The funeral costs shown in Table 7 represent the difference between average funeral costs in the current year and the costs that would occur in a future year -- assuming a normal life expectancy for the fatally injured person. The value shown in Table 7 is based on: the median age of males and females involved in bicycle/motor-vehicle accidents (16.2 years for males and 17.5 years for females); the remaining years of life expectancy for males and females (54.3 years for males and 60 years for females); the weighted average remaining years of life expectancy (55.2 years); average funeral costs for 1975 ($1,125); productivity price increase at three percent per year ($5,717); present worth factor, assuming a seven percent discount rate ($138); and net difference between present and future cost ($987).

LOSSES TO OTHERS

The costs of losses to others include employer losses (temporary or permanent replacement costs, time spent visiting patients, transportation for medical attention, home care, and time spent in vehicle repair and replacement. Faigin (1976) has estimated the cost of losses to others resulting from fatalities and from five different injury levels. The cost estimates shown in Table 7 are the same as Faigin's estimates for fatalities and for level-two injuries.

LEGAL AND COURT COSTS

No data are available on the proportion of bicycle/motor-vehicle accidents that result in litigation, so it was necessary to formulate a number of assumptions in order to estimate the legal and court costs associated with bicycle/motor-vehicle accidents. The most fundamental assumption is that the only bicycle/motor-vehicle accidents that result in litigation are those in which the motorist is clearly culpable. Data compiled by Cross and Fisher (1977) indicate that the motorist was clearly culpable in 34% of the fatal accidents and 28% of the non-fatal accidents. Other assumptions are as follows:

  • A suit is filed against the motorist in all of the fatal cases in which the motorist is culpable and 20% of the non-fatal cases in which the motorist is culpable. Fifteen percent of the suits are tried in court.

  • When a suit is filed against the motorist, a settlement in favor of the bicyclist is awarded in 90% of the fatal cases and 60% of the non-fatal cases. All motorists who are clearly culpable are issued a traffic citation. The average settlement is $50,000 for a fatal accident and $4,500 for a non-fatal accident. The plaintiff's legal costs are 25% of the settlement. The defendant's legal costs average $1,800 per suit. The average court cost for suits settled by trial is $7,370.

  • The average citation costs are $50 for fatal accidents and $20 for non-fatal accidents.

All of the above estimates of costs are based upon cost data presented in Faigin's report (1976), and ail cost estimates are in terms of 1975 dollars.

INSURANCE ADMINISTRATION COSTS

The insurance administration cost represents the cost of insurance overload that could be saved with the reduction of bicycle/motor-vehicle accidents. The cost estimates shown in Table 7 are based upon cost data presented in Faigin's report (1976).

ACCIDENT INVESTIGATION COSTS

The accident investigation costs refer to the cost of time and resources expended by enforcement officials in investigating the accident. The cost estimates are based upon cost data presented in Faigin's report.

VEHICLE DAMAGE

The estimates of the cost of vehicle damage are based upon data compiled by Cross and Fisher (1977).


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Contents copyright 1978,
AAA Safety and Educational Foundation
Republished with permission
Internet edition prepared by John S. Allen