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Uncertainty, Insurance, And The Learned Hand Formula, Peter Grossman, Reed Cearley, Daniel Cole

Peter Z. Grossman

Note: Final definitive version is available at Oxford Journals. http://www.oxfordjournals.org Law and economics scholars have written extensively about how insurance markets affect the tort system. They have noted the beneficial cost-spreading function of insurance, as well as the detrimental incentive-distorting affects of insurance, stemming from problems of adverse selection and moral hazard. Surprisingly, however, scholars have over-looked one of the most important salutary functions that insurance serves for the tort system: it provides much of the information courts need to apply the Marginal Learned Hand Formula. This paper explains precisely how insurance markets collect and disseminate information about the expected …