Insurance Law Commons^™

Nonparty Interests In Contract Law, Omri Ben-Shahar, David A. Hoffman, Cathy Hwang

All Faculty Scholarship

Contract law has one overarching goal: to advance the legitimate interests of the contracting parties. For the most part, scholars, judges, and parties embrace this party primacy norm, recognizing only a few exceptions, such as mandatory rules that bar enforcement of agreements that harm others. This Article describes a distinct species of previously unnoticed contract law rules that advance nonparty interests, which it calls “nonparty defaults."

In doing so, this Article makes three contributions to the contract law literature. First, it identifies nonparty defaults as a judicial technique. It shows how courts deviate from the party primary norm with surprising …

Uncertainty > Risk: Lessons For Legal Thought From The Insurance Runoff Market, Tom Baker

All Faculty Scholarship

Insurance ideas inform legal thought: from tort law, to health law and financial services regulation, to theories of distributive justice. Within that thought, insurance is conceived as an ideal type in which insurers distribute determinable risks through contracts that fix the parties’ obligations in advance. This ideal type has normative appeal, among other reasons because it explains how tort law might achieve in practice the objectives of tort theory. This ideal type also supports a restrictive vision of liability-based regulation that opposes expansions and supports cutbacks, on the grounds that uncertainty poses an existential threat to insurance markets.

Prior work …

Back To The Future Of Cyber Insurance, Tom Baker

All Faculty Scholarship

Written for an insurance trade publication, this brief essay identifies five ways that insurers manage uncertainty in selling cyber insurance: (1) providing valuable services beyond risk transfer; (2) contract design, (3) rapid iteration of pricing and forms, (4) limits management and reinsurance, and (5) claims disputing. Cyber insurers provide easy-to-price loss prevention and mitigation services so that the value proposition includes more than the (difficult to price) risk transfer. Cyber insurers design their contracts to include narrowly defined categories of coverage, typically with separate limits and with claims-made coverage for liability risks, and traditional insurers design their contracts to limit …

In Defense Of The Restatement Of Liability Insurance Law, Tom Baker, Kyle D. Logue

All Faculty Scholarship

For most non-contractual legal claims for damages that are brought against individuals or firms, there is some form of liability insurance coverage. The Restatement of the Law Liability Insurance is the American Law Institute’s first effort to “restate” the common law governing such liability insurance policies, and we are the reporters. In a recent essay funded by the insurance industry, Yale Law Professor George Priest launched a strident critique of the Restatement project, arguing that the rules adopted in the Restatement:

(a) are radically contrary to existing case law,

(b) have a naïve “pro-policyholder” bias that ignores basic economic insights …

Mandatory Rules And Default Rules In Insurance Contracts, Tom Baker, Kyle D. Logue

All Faculty Scholarship

The economic analysis of contract law can be organized around two general questions: (1) what are the efficient or welfare-maximizing substantive rules of contract law; and (2) once those rules have been identified, when if ever should they be made mandatory and when should they be merely “default rules” that the parties can contract around if they wish? Much of contract theory over the past twenty years has been devoted to developing answers to those two questions. The same two questions can be posed with respect to the rules of insurance law. Although previous scholars have examined particular substantive doctrines …

“You Want Insurance With That?” Using Behavioral Economics To Protect Consumers From Add-On Insurance Products, Tom Baker, Peter Siegelman

All Faculty Scholarship

Persistently high profits on “insurance” for small value losses sold as an add-on to other products or services (such as extended warranties sold with consumer electronics, loss damage waivers sold with a car rental, and credit life insurance sold with a loan) pose a twofold challenge to the standard economic analysis of insurance. First, expected utility theory teaches that people should not buy insurance for small value losses. Second, the market should not in the long run permit sellers to charge prices that greatly exceed the cost of providing the insurance. Combining the insights of the Gabaix and Laibson shrouded …

Regulation By Liability Insurance: From Auto To Lawyers Professional Liability, Tom Baker, Rick Swedloff

All Faculty Scholarship

Liability insurers use a variety of tools to address adverse selection and moral hazard in insurance relationships. These tools can act on insureds in a manner that can be understood as regulation. We identify seven categories of such regulatory activities: risk-based pricing, underwriting, contract design, claims management, loss prevention services, research and education, and engagement with public regulators. We describe these activities in general terms and then draw upon prior literature to explore them in the context of five areas of liability and corresponding insurance: shareholder liability, auto liability, gun liability, medical professional liability, and lawyers’ professional liability. The goal …

Reconsidering Insurance For Punitive Damages, Tom Baker

All Faculty Scholarship

No abstract provided.

Constructing The Insurance Relationship: Sales Stories, Claims Stories, And Insurance Contract Damages, Tom Baker

All Faculty Scholarship

No abstract provided.