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Encouraging Insurers To Regulate: The Role (If Any) For Tort Law, Kyle D. Logue

Articles

Insurance companies are financially responsible for a substantial portion of the losses associated with risky activities in the economy. The more insurers can lower the risks posed by their insureds, the more competitively they can price their policies, and the more customers they can attract. Thus, competition forces insurers to be private regulators of risk. To that end, insurers deploy a range of techniques to encourage their insureds to reduce the risks of their insured activities, from charging experience-rated premiums to discounting premium rates for insureds who make specific behavioral changes designed to reduce risk. Somewhat paradoxically, however, tort law …

A Financial Economic Theory Of Punitive Damages, Robert J. Rhee

Michigan Law Review

This Article provides a financial economic theory of punitive damages. The core problem, as the Supreme Court acknowledged in Exxon Shipping Co. v. Baker, is not the systemic amount of punitive damages in the tort system; rather it is the risk of outlier outcomes. Low frequency, high severity awards are unpredictable, cause financial distress, and beget social cost. By focusing only on offsetting escaped liability, the standard law and economics theory fails to account for the core problem of variance. This Article provides a risk arbitrage analysis of the relationship between variance, litigation valuation, and optimal deterrence. Starting with settlement …

Insufficient Activity And Tort Liability: A Rejoinder, David Gilo, Ehud Guttel

Michigan Law Review First Impressions

In our article, Negligence and Insufficient Activity, we proposed that tort scholarship has overlooked the risk that injurers will behave strategically in setting their activity levels. Whereas the standard literature has predicted that injurers who are subject to a negligence regime will often invest efficiently in care but choose excessive activity levels, we showed that they may do exactly the opposite: injurers may deliberately restrict their activity to avoid investments in socially desirable precaution. After reviewing the conditions that may give rise to the risk of insufficient activity, we examined the ways in which the legal system can minimize the …

Activity Levels Under The Hand Formula: A Comment On Gilo And Guttel, Richard A. Epstein

Michigan Law Review First Impressions

A response to David Gilo & Ehud Guttel, Negligence and Insufficient Activity: The Missing Paradigm in Torts, 108 Mich. L. Rev. 277 (2009). Within the law and economics field, there often surfaces a near hypnotic attraction to the Hand formula as the one and only tool that drives tort law toward economic efficiency. Hand's intuition was, of course, that the test for efficiency requires a balancing of three variables. The burden of taking particular precautions is compared to the expected loss from some activity, which in turn consists of the likelihood of some particular harm multiplied by its anticipated severity. …

Another Theory Of Insufficient Activity Levels, Mark Grady

Michigan Law Review First Impressions

A response to David Gilo & Ehud Guttel, Negligence and Insufficient Activity: The Missing Paradigm in Torts, 108 Mich L. Rev. 277 (2009). Professors David Gilo and Ehud Guttel have written an important article on the tendency of the negligence rule to produce inefficiently low activity levels. In Negligence and Insufficient Activity: The Missing Paradigm in Torts, the authors claim insufficient activity to be the "missing paradigm" in tort theory. Although I agree with Gilo and Guttel that this missing paradigm is central to negligence doctrine, I disagree with them about how insufficient activity levels arise.

Insufficient Analysis Of Insufficient Activity, Kenneth S. Abraham

Michigan Law Review First Impressions

A response to David Gilo & Ehud Guttel, Negligence and Insufficient Activity: The Missing Paradigm in Torts, 108 Mich L. Rev. 277 (2009). In Negligence and Insufficient Activity: The Missing Paradigm in Torts, David Gilo and Ehud Guttel argue that negligence law encourages inefficiently high and low levels of activity because negligence law ordinarily does not take activity levels into account. They suggest that the law should impose liability for failing to take safety precautions-even where precautions would not be cost-justified-whenever the threat of this liability negates the incentive for an actor to choose an insufficient level of activity. Until …

Dilution Of Liability And Multiple Tortfeasors In The Context Of Liability For Unrequested Precautions, Assaf Jacob

Michigan Law Review First Impressions

A Response to Ariel Porat, Private Production of Public Goods: Liability for Unrequested Benefits, 108 Mich. L. Rev. (2009). One of the more intriguing questions in tort law is the case of joint and several tortfeasors and the dilution-of-liability puzzle. When harm materializes and there are multiple potential tortfeasors, the law tends to limit the number of joint tortfeasors, focusing the final burden on a small number of actors. This limitation is achieved by several legal mechanisms, such as a no duty rule, a narrow interpretation of negligence, a restrictive implementation of the causal link (be it the but for …

Letting Good Deeds Go Unpunished: Volunteer Immunity Laws And Tort Deterrence, Jill R. Horwitz, Joseph Mead

Articles

Does tort law deter risky behavior in individuals? We explore this question by examining the relationship between tort immunity and volunteering. During the 1980s and 1990s, nearly every state provided some degree of volunteer immunity. Congress followed with the 1997 Volunteer Protection Act. This article analyzes these acts, identifying three motivations for them: the chilling effects of tort liability, limits on liability insurance, and moral concerns. Using data from the Independent Survey’s Giving and Volunteering surveys, we then identify a large and positive correlation between immunity and volunteering. We next consider the implications of the findings for tort theory and …

Operationalizing Deterrence Claims Management (In Hopsitals, A Large Retailer, And Jails And Prisons), Margo Schlanger

Articles

The theory that the prospect of liability for damages deters risky behavior has been developed in countless articles and books. The literature is far sparser, however, on how deterrence is operationalized. And prior work slights an equally important effect of damage actions, to incentivize claims management in addition to harm-reduction responses that are cost- rather than liabilityminimizing. This article works in the intersection of these two understudied areas, focusing on claims management steps taken by frequently sued organizations, and opening a window into the black box of deterrence to see how those steps may end up serving harm-reduction purposes as …

Second Best Damage Action Deterrence, Margo Schlanger

Articles

Potential defendants faced with the prospect of tort or tort-like damage actions can reduce their liability exposure in a number of ways. Prior scholarship has dwelled primarily on the possibility that they may respond to the threat of liability by augmenting the amount of care they take.1 Defendants (I limit myself to defendants for simplicity) will increase their expenditures on care, so the theory goes, when those expenditures yield sufficient liability-reducing dividends; more care decreases liability exposure by simultaneously making it less likely that the actors will be found to have behaved tortiously in the event of an accident and …

Snake-Oil Security Claims The Systematic Misrepresentation Of Product Security In The E-Commerce Arena, John R. Michener, Steven D. Mohan, James B. Astrachan, David R. Hale

Michigan Telecommunications & Technology Law Review

The modern commercial systems and software industry in the United States have grown up in a snake-oil salesman's paradise. The largest sector of this industry by far is composed of standard commercial systems that are marketed to provide specified functionality (e.g. Internet web server, firewall, router, etc.) Such products are generally provided with a blanket disclaimer stating that the purchaser must evaluate the suitability of the product for use, and that the user assumes all liability for product behavior. In general, users cannot evaluate and cannot be expected to evaluate the security claims of a product. The ability to analyze …

Risk-Utility Balancing In Design Defect Cases, David G. Owen

University of Michigan Journal of Law Reform

Design defectiveness is generally defined in terms of a risk-utility balance, the form of liability test adopted by the Restatement (Third) of Torts: Products Liability. However, confusion abounds in how courts formulate such balancing tests. A national survey of recent appellate court decisions reveals that courts generally define the balance in terms of the product's risks and utility, a formulation which appears to call for weighing the product's global costs against the product's global benefits. So defined, the design defect test is incorrect. What appellate courts mean for juries to decide, and what juries ordinarily do in fact decide, …

Liability Of Suppliers Of Natural Raw Materials And The Restatement (Third) Of Torts: Products Liability- A First Step Toward Sound Public Policy, M. Stuart Madden

University of Michigan Journal of Law Reform

From its inception, the law governing liability for damage or injuries caused by defective products has pertained to potential liability for products that have been processed, finished, or fabricated. Naturally occurring raw materials, for the most part, have been considered beyond doctrinal concern, largely because characterizing a merchantable raw material, such as copper or pigiron, as defective is conceptually difficult. Nevertheless, certain doctrines that developed for the application of products liability to other products have gained sporadic application to naturally occurring raw materials, including the sophisticated purchaser defense, the bulk supplier defense, and the ingredient supplier defense. Madden argues that …

Inadequate Product Warnings And Causation, Mark Geistfeld

University of Michigan Journal of Law Reform

The market failure that provides an economic justification for imposing tort liability on product sellers for design and manufacturing defects also justifies tort liability for inadequate warnings. In general, the liability standards proposed in the most recent draft of the Restatement (Third) of Torts: Products Liability have the potential to remedy this market failure, although this purpose is not furthered by the Draft's requirement that plaintiffs prove that an adequate warning would have prevented the injury. Unless courts presume causation (as most currently do), sellers will not have sufficient incentive to warn about unavoidable product risks. Moreover, there is no …

Arriving At Reasonable Alternative Design: The Reporters' Travelogue, James A. Henderson Jr., Aaron D. Twerski

University of Michigan Journal of Law Reform

Substantial commentary and controversy have been generated by the requirement in the new Restatement (Third) of Torts: Products Liability that plaintiffs in most (but not all) cases involving claims of defective product design show that a reasonable alternative design was available and that failure to adopt the alternative rendered the defendant's design not reasonably safe. Henderson and Twerski explain the origins of that requirement in American products liability case law and show that it is not only the majority position but also comports with widely shared views regarding the proper objectives of our liability system. Although consumer expectations cannot serve …

Statutory Compliance And Tort Liability: Examining The Strongest Case, Michael D. Green

University of Michigan Journal of Law Reform

Professor Green addresses the matter of the proper balance between the tort system and regulation in the context of prescription drugs and the FDA's vigorous oversight of the industry. He articulates several reasons why a regulatory compliance defense, in which tort law would defer to FDA regulation, is quite attractive. Despite the superior expertise of the FDA in assessing the benefits and risks of a drug, a regulatory compliance defense is considerably more problematical than might appear at first glance. Ascertaining compliance with FDA requirements could be a lengthy and complicated inquiry that would either replace or supplement the issues …

Risk-Utility Analysis In The Failure To Warn Context, Paul D. Rheingold, Susan B. Feinglass

University of Michigan Journal of Law Reform

Elsewhere in this Symposium issue, Professor Mark Geistfeld presents an argument favoring the application of risk-utility analysis to the duty to warn doctrine encompassed by the Restatement (Third) of Torts. In addition, the comments and the reporters' notes to the Restatement (Third) suggest altering the traditional duty to warn if the warning would cause "information overload," if the danger is "open and obvious," or if the danger applies to only a small percentage of potential customers.

In response to Geistfeld and the Restatement (Third) comments and notes, Rheingold and Feinglass assert that applying a risk-utility analysis or altering the …

The Idea Of Fairness In The Law Of Enterprise Liability, Gregory C. Keating

Michigan Law Review

The theory and practice of enterprise liability are oddly disjoined. On the one hand, case rhetoric insists that considerations of fairness are among the primary justifications for imposing enterprise liability. On the other hand, normatively inclined and theoretically ambitious scholarship on enterprise liability is overwhelmingly economic in cast. Economically inclined scholars have flocked to the field, while other kinds of tort theorists have shunned it, implicitly or explicitly conceding it to economic analysis. This paper argues that, contrary to this consensus, there is a powerful and important fairness case to be made for enterprise liability. This case fits the rhetoric …

Rescuing The Revolution: The Revived Case For Enterprise Liability, Steven P. Croley, Jon D. Hanson

Michigan Law Review

The article proceeds as follows. Part I defines important terms and introduces the two-by-four Products Liability Matrix by explaining the eight possible positions that might be taken with respect to the mutability and liability-standard dimensions of products liability. Part II provides a backdrop for the current products liability debate, first by setting out a capsule history of the evolution of the modem products liability regime, and then by explaining the arguments offered by the "first generation" of products liability scholars to justify expanded manufacturer liability. Part II also illustrates the utility of the Products Liability Matrix by locating many of …

Stories Of Rights: Developing Moral Theory And Teaching Law, Patricia A. Cain, Jean C. Love

Michigan Law Review

A Review of Rights, Restitution, & Risk: Essays in Moral Theory by Judith Jarvis Thomson, edited by William Parent

Corporate Behavior And The Social Efficiency Of Tort Law, John A. Siliciano

Michigan Law Review

This article examines this dissonance between accepted theory and observed reality, between what the model envisions and what the tort system seems to deliver. After sketching the model in greater detail, the first section of the article reviews restraints within tort law on the achievement of efficient outcomes. The analysis then turns to the broader legal environment, and describes how legally sanctioned means of liability evasion - such as the corporate law doctrine of limited liability and the bankruptcy rules permitting discharge of obligations - may further undermine the practical utility of the social efficiency model of tort. The final …

Toxic Substance Contamination: The Risk-Benefit Approach To Causation Analysis, Bradford W. Kuster

University of Michigan Journal of Law Reform

This article argues that the dilemma described above requires change and proposes a new standard for causation in this type of toxic contamination case. Part I examines the difficulties posed by conventional common law relief mechanisms, and the inadequacies of existing statutory relief mechanisms. Part II scrutinizes a more lenient burden of proof standard, the risk-benefit approach, which some courts have applied when faced with situations involving scientific uncertainties. The risk-benefit approach will be applied to causation analysis in the context of damage recoveries, using the. Hemlock, Michigan, situation as a case study. Part III discusses present congressional proposals, and …

Products Liability--The Expansion Of Fraud, Negligence, And Strict Tort Liability, John A. Sebert Jr.

Michigan Law Review

While judicial acceptance of this concept of strict tort liability has been proceeding apace, far less dramatic but equally significant developments have been occurring with respect to both negligence and fraud liability. The possibility of recovering for a seller's misrepresentations concerning his product has been enhanced by a plaintiff-oriented judicial redefinition of two elements of a cause of action for fraud: defendant's knowledge of the falsity of his representation and plaintiff's reliance upon the deception. At the same time, negligence liability has often come to resemble liability without fault as courts continue to deemphasize, as a prerequisite to the application …

Products Liability Based Upon Violation Of Statutory Standards, Joseph H. Ballway Jr.

Michigan Law Review

Regulatory enactments controlling production and distribution can give rise in several different ways to civil liability on behalf of persons injured by non-conforming merchandise. For instance, if a statute codifies existing common-law rules of negligence, its effect is merely to place the weight of legislative authority behind ordinary negligence principles. Since an injured party's recovery under such a provision still depends largely upon his proving in the traditional manner that a defendant failed to exercise due care, this kind of statute merits no further discussion. On the other hand, if particular legislation expressly states that a violator may be subjected …

Concurrent Causation In Insurance Contracts, William Conant Brewer Jr.

Michigan Law Review

A great deal of work and thought has been devoted to concurrent causation problems in the field of torts. Less attention has been paid to the insurance cases, and no serious effort has been made to formulate the separate rules applicable to them. It is the thesis of this article that concurrent causation problems which arise under an insurance contract must be handled somewhat differently from those which arise in connection with tort litigation, and that the tendency to borrow rules of law from the larger tort field and apply them to the smaller volume of insurance cases can only …

Palsgraf Revisited, William L. Prosser

Michigan Law Review

Perhaps the most celebrated of all tort cases is Palsgraf v. Long Island Railroad Company. Certainly it is one of the most controversial. Thirteen judges in all passed upon the case, and seven of them were for the plaintiff, at least in the sense that they considered that the issue was one to be left to the jury. Four of the remaining six, sitting on the Court of Appeals of New York, had the :final word, and they set aside the verdict, dismissed the complaint, and ordered judgment for the defendant. The Advisers of the Restatement of Torts debated …

Master And Servant -The Filling Station Operator As An Independent Contractor, William F. Andersen

Michigan Law Review

Under the press of modern concepts of responsibility of business units it becomes necessary to re-examine the relation between the corner filling station and the big oil company that uses it as a means of getting its products before the consuming public. The factual situation is usually this: the operator may own the station, or may lease it from the oil company; the oil company invariably owns the equipment, such as gas pumps, tanks, and tank trucks, which it leases to the operator; by a sales contract the operator binds himself to sell only the petroleum products of the oil …