De Facto “No Fault” Insurance 2006

[Martin Hash]

1 Introduction (Premise)

In our Western society the goal is to cast somebody in the role of villain. Whether some person, or fictional legal entity such as a corporation (the current bugaboo), is truly responsibility in a scientific sense is often debatable. The elephant in the room is the simple fact that in many instances, no fault can be assigned: for example, a meteorite was the cause of the harm. By allowing tortured law and inflammatory rhetoric designed to inflame human emotions, huge amounts of unproductive (in an economic sense) gamesmanship is introduced into an otherwise efficient and productive legal system.

Much social policy is implemented through the culture and politics of liability: civil rights, disabled access, compensation for injury, property, or reputation; also environmental, product safety, pensions, and health care. “Liability is a form of government regulation; that is, the government mandates particular behavior through the rule of law and creates private rights of action as the means of enforcing the mandate.” Lynn M. LoPucki, The Death of Liability, 106 Yale L.J. 1 (1996-1997) at 47.

Law is secular codification for controlling human behavior. Government has divided penalties for violating the law into two categories: criminal and civil. Roughly, incarceration is the penalty of violating the first, and the second is a matter of deprivation of wealth via liability. Mostly, liability is associated with products and torts, but money judgments are also used to enforce contracts, civil rights, labor, environment, taxes, and property rights. Unfortunately, only responsible people who have accumulated the wealth to surrender can be held responsible: only responsible people are held responsible. “Acts of god” also have no associated liability. It brings up the question, “what is liability for?” Is it to assign responsibility? Is it to provide for those who need medical attention? Is it retribution for mental anguish? If those are the reasons, then the strategy is failing, because assigning liability is subjective at best, every year more and more people cannot receive the medical attention they need, and it is safe to say that the vast majority of people’s “mental anguish” receive no soothing in the way of financial reparations. In fact, a subculture of disdain and disrespect towards business has emerged that treats business, not as an abstract legal fiction, but as the cause of many of society’s ills. The word “corporation” has taken on an evil connotation, not just to America’s political socialist left for whom “business” has always been the antithesis of “government,” but to America’s working class as well. In a democratic society where it requires only a simple majority of people to vote to take financially successful people’s assets: envy, spite, and resentment are real possibilities.

Culturally, the American emphasis on placing blame has colored the rest of the world’s perception (citation). Liability, as exemplified by tort punitive damage awards in U.S. courts, are alien to the Horaitto Alger-like philosophy of self-reliance and endurance. The common excuse offered by lawyers when confronted with this seeming conflict in morays, glibly point out that American society has chosen the tort system to regulate their free enterprise businesses rather than criminal prosecution or fines imposed by the Government. (citation) This explanation assumes that businesses or people alter their tort causing activities in some remedial way after losing a lawsuit or hearing about other defendant’s large monetary awards. There seems scant historic evidence of plaintiff’s positive change in behavior resulting from large pecuniary penalties, yet there is plenty of apocryphal evidence that many businesses curtail activities that would be beneficial to society at large, such as donated meeting buildings or professional expertise (citation). In fact, the whole theory behind “joint and several liability” is simply bizarre: tortfeasors need not act at the same time, act in concert, or agree to engage in a course of tortious conduct, so long as their independent acts contributed to causing a tortious injury, they are jointly and severally liable for it.” And it gets further complicated in jurisdictions that recognize “comparative negligence” and “contribution.” Rather than getting better, data indicates that tort judgments are increasing rapidly. Erik Moller, Nicholas M. Pace, and Stephen J. Carroll, Punitive Damages in Financial Injury Jury Verdicts, RAND Institute for Civil Justice, Document No. MR-888-ICJ (1997).

American society, whose economic philosophy is based on the concept of “liberty” to create productivity and efficiencies, has the parasitic drain of “liability” curtailing optimal operation. If “liability” could be removed from the equation, the time and money spent protecting against it would instead be channeled into growth and the creation of wealth. That is why this paper advocates “no fault” insurance. “The administrative costs of insurance delivered through tort law are vastly greater than the administrative costs of any first-party insurance regime.” Cf. Mark Geistfeld, The Political Economy of Neocontractual Proposals for Products Liability Reform, 72 Tex. L. Rev. 803, 811 (1994).

1.1 Why “No Fault” Insurance?

A Paper.doc