Limited Liability

[Martin Hash]

The single biggest cause of irrational business decisions is the threat of liability litigation. Liability, civil lawsuits aimed at transferring money from those deemed “perpetrators” to those deemed “victims” causes the most egregious distortions of rational behavior. All because of stifling blame, accusations, lawsuits, and the emotional distress instigated by liability. Liability is like a singularity in space that causes everything else to distort around it. How many scientific advancements are NOT made? How many playgrounds, theaters, and public venues are NOT available? How many services are NOT rendered? What business concepts are abandoned out of frustration simply because there is a nebulous threat of liability?

“Liability” is a devil’s bargain between attorneys and insurance companies. Insurance is the business of making money selling nothing. They want people afraid of liability to sell more nothing. Attorneys have the power of contingency fees (loser does not pay, and attorney works on commission), plus resentful and indignant juries. People without assets or insurance are inherently safe because there is nothing to seize. Big business is already protected through a legal technique called “securitization.” Only responsible individuals who have led responsible lives are held responsible, and the fear of having their savings taken from them drives the insurance industry’s profits.

Even if the situation is examined from an ethical perspective, how injuries occur should NOT be part of the equation. In fact, injuries are far more likely to come from unfortunate events than from the actions of people - but should not all injuries be redressed equally?! The biggest fallacy of today’s liability system is that those who are injured are victims a second time if the perpetrator has no assets. So if the goal of liability is to recompense the victims then that goal is not being achieved.

There is no need for greedy claims of punitive damages so that attorneys can get rich, and retribution is a poor reason to compromise society. If someone’s actions cause or threaten to cause civil harm, they should pay a fine into a General Liability Pool, and if their actions are criminal, they should face judicial punishment. Universal healthcare would provide comfort and maintenance to those who are physically or emotionally injured, and the General Liability Pool would provide funds to alleviate property or business damage.

Think of the efficiencies that would be achieved if liability were not part of the equation...