V. Tort law
D. Liability
2. Victim fault
b. Economic analysis of legal options (cont'd.)
Conduct under alternative
legal rules: see handout (cont'd.)
Result: All
negligence rules yield the same incentive: neither side is negligent, "provided that the law defines due care--as it
does--as the care that is optimal if the other party is exercising due care." (P173)
Since efficiency is not
enhanced by making the negligent injurer pay damages to the negligent victim, the common
law traditionally allowed the cost of the accident to lie where it fell, in order to
minimize the costs of administering the legal system. (P174)
=> contributory
negligence --> fewer cases
Comparative negligence entails
a transfer payment that generates no allocative gain and transfer payments involve
administrative costs. (P174-5)
This requires the expenditure of additional resources by the parties
and the courts, and by making it harder to predict the extent of liability may increase
the rate of litigation. (P175)
Both contributory negligence and comparative negligence -->
uncertain legal outcomes and uncertain effects on the amount of care taken by injurers and
victims (P175)
Comparative
negligence makes most economic sense when
society wants to use the tort
system to provide insurance to
accident victims, because it gives the careless victim of a careless injurer something;
contributory negligence gives him nothing.
But why in an age of much more widely available market insurance than
when contributory negligence held sway in tort law there should be a desire to provide
insurance through the tort system is a mystery to the positive economic theorist of the
common law. (P175)
b. Assumption of risk
Ordway
(d) v. Superior Court / Casella (p) 198 Cal.App.3d 98 (1988)
Appeal to Superior Court for
dismissal of case
illustrates assumption of risk --> no liability
"The defenses of assumption of risk and contributory
negligence are based on different theories. Contributory negligence arises from a
[plaintiff's] lack of due care. The defense of assumption of risk, on the other hand, will
negative liability regardless of the fact that
plaintiff may have acted with due care.
"Or stated another way, the individual who knowingly and
voluntarily assumes a risk, whether for recreational enjoyment, economic reward, or some
similar purpose, is deemed to have agreed to reduce the defendant's duty of care. ... The
defendant must, however, anticipate that some risks will be unreasonably undertaken, and a
failure to guard against those may result in liability.
"The correct rule is this: If the defendant's actions, even those
which might cause incidental physical damage in some sports, are within the ordinary
expectations of the participants -- such as blocking in football, checking in hockey,
knock-out punches in boxing, and aggressive riding in horse racing -- no cause of action
can succeed based on a resulting injury."
assumption of risk => no liability => victim has incentives to take all cost-effective precautions, observable and unobservable. Logical in cases of hazardous activities.
3. Strict liability
Strict tort liability means that someone who causes an accident is liable for the victim's damages even if the injury could not have been avoided by the exercise of due care. (P177)
Turner v Big Lake Oil Company, 128 Tex. 155; 96 S.W.2d 221 (1936)
contrasts
strict ("absolute") liability versus negligence
opts for
negligence--strict liability is not a default standard in the common law
with a high bar at that--requires that plaintiffs "prove some
specific act of neglect" by defendant rather than even a "res ipsa
loquitor" argument
So the issue becomes, when does the law enforce a standard of strict liability?
Escola v. Coca Cola Bottling Co., 24 Cal. 2d 453 (1944)
discusses
strict liability
the most interesting part
of the case is the concurring opinion
"The liability of the manufacturer to an immediate buyer injured
by a defective product follows without proof of negligence from the implied warranty of
safety attending the sale."
"It is evident that the manufacturer can anticipate some hazards
and guard against the recurrence of others, as the public cannot.
"It is to the public interest to discourage the marketing of
products having defects that are a menace to the public. If such products nevertheless
find their way into the market it is to the public interest to place the responsibility
for whatever injury they may cause upon the manufacturer, who, even if he is not negligent
in the manufacture of the product, is responsible for its reaching the market."
the issue: Do we follow a rule of caveat emptor (let the buyer beware), under which the buyer takes the good as he finds it, complete with any defects, or a rule of caveat venditor, under which, if anything goes wrong, the seller is laible? (F213)
advantage to
caveat emptor: avoids lawsuits
advantage to caveat venditor: sellers may be low-cost avoiders of
damage
assign liability to the side with
better information (F215)
Better seller
information
=> apply caveat venditor
=> seller insures product.
(F214)
encourages sellers to exploit all
safeguards, observable and unobservable
[because of undercompensation for loss in practice] even with tort
rules that make someone else liable, most of us still have at least some incentive to
avoid being victims [a form of coinsurance] (F215)
In general, true insurance is
preferable to tort insurance:
Insurance policies have two important advantages over liability law as
mechanism for protecting people from risk. The first is that liability law is too
selective.... A second advantage ... is that an insurance company wants a reputation for
being generous out benefits.... (F215)
Even with caveat emptor: parties can still assign liability by contract, rather than tort law (F216)
McDaniel v. McNeil Lab. Inc., 241 N.W.2d 822 (1976)
illustrates that "product liability" is not true
strict liability
defendants can escape
liability if there is no defect