Covering Accident Costs: Insurance, Liability, and Tort Reforms

Seven: Summary of Principal Themes

SEVEN Summary of Principal Themes Perhaps the best way to gather the modem strands of the insurance rationale together is to consider which arguments about the insurance rationale from scholarship have been accepted and put to use by courts and legislatures. This, in tum, will allow us to plot the point where contemporary practice places us on the tort "decision tree" set out at the end of Part I. Generally, courts and legislatures have absorbed the bulk of the realists' argument for adoption of the insurance rationale, albeit in more-simplified terms. Still, only rarely have they given those arguments detailed consideration, and they have resisted taking them to their logical extremes. The arguments of the insurance rationale's critics, on the other hand, have received only occasional attention, although opposition to the insurance rationale has grown in both courts and legislat~res during the last decade. At this point, it is fairly common for courts, both inside and outside product liability, to refer to corporate and institutional defendants' superior access to and likelihood of obtaining insurance. In practice, these factors are nearly always treated as empirical observations, and there is seldom any attempt to document them with any sort of precision. Courts simply assume, in a variety of contexts, that corporate and institutional defendants are in a better position to obtain insurance than the individual victims of accidents. Usually they couple that assumption with the assertion that such defendants can treat the cost of liability as a cost of business and can pass that cost on, presumably by charging higher prices to the consuming public for their goods or services. And courts have also sometimes added the claim that insurance could be purchased by the defendant at a relatively low cost. Thus, the access, likelihood, cost of insurance, and cost of business themes Copyrighted Material 99 100 - CHAPTER SEVEN advanced by the realists in the first half of the twentieth century have, by the second half of the century, finally achieved a measure of practical acceptance . The risk-management, transfer-cost, and inevitable-risk arguments also used by the realists have received less attention, although the last of these themes sometimes inhabits the shadows of judicial opinions. Courts applying the insurance rationale have generally assumed that cost spreading and deterrence of unsafe conduct move in corresponding directions, but they have not examined the interactions between insurance and safety in any detail . Similarly, they have given relatively little consideration to the problems of transfer costs. One finds occasional mention of the inevitable risks of a modem industrial society, but this theme is not nearly as prominent in practice as it was in realist scholarly writing. In contrast to the realist position (which after all has been around a long time), most of the arguments of the recent critics of the insurance rationale have not yet penetrated extensively into judicial debate. When, in recent years, courts have either refused to extend liability or have cut back on existing rules, they have not infrequently referred to the high cost of insurance . And in a few cases, such as liability for defective pharmaceutical products, courts have listed the danger of technological stagnation as a factor counseling against strict liability. On rare occasions, they have also mentioned problems of insurability currently being experienced in some sectors, which can be interpreted as oblique reference to the problems of predictability . But the other themes of the insurance rationale critique-such as preference for first-party insurance, adverse selection, moral hazard, and regressive taxation-are almost completely missing from decisional literature . Where, then, do the clusters of arguments advanced by courts and legislatures place us on the tort doctrine decision tree? In my view, the following observations represent a reasonably fair assessment: Torts as public policy Courts and legislatures are virtually unani.mous in accepting the idea that tort doctrine should be driven largely by considerations of public policy. As with most scholars, the debate is over which public policies carry the greatest force, not over whether policy considerations have a leading role to play. On the subsidiary question of relative governmental responsibilities, there seems to be a tacit agreement that courts should serve as the principal architects of tort law, with the legislatures as overseers. Legislatures feel free to make exceptions and regulations with respect to judicially developed tort Copyrighted Material Principal Themes - 101 doctrine, and they may legislate compensation systems to complement or...