TORTS OUTLINE

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TORTS OUTLINE – Tort aims to control physical harm (mainly from accidents) in society.

NEGLIGENCE…2
LOOK TO THE PLAINTIFF (CNEG, ASSUMPTION OF RISK)…5
CAUSATION…7
STRICT LIABILITY…12
PRODUCTS LIABILITY…15
BEYOND TORT LIBAILITY…19

PHASE 1: LOOK TO DEFENDANT

I. INTENTIONAL FAULT-BASED TORTS: BATTERY, TRESPASS, AND NUISSANCE
      A. Battery
          1. intentionality, harm/offense, and lack of consent

         Battery: ―The intentional infliction of harmful bodily contact upon another without his consent‖
               1. Harmful or offensive contact
               2. Intentionality
                  Hard intent = purpose
                  Soft intent = knowledge to a substantial certainty
                  Know it will happen even if we do not wish for it to happen

         Intent: purpose or knowledge to substantial certainty that at least contact will happen – Garrett v. Dailey

         How far does intent have to travel for there to be battery liability?
         Action  Result 1 (contact)  R2 (offensive or harmful nature)  R3 (specific injuries)

         Intent must travel to R1. Some courts will require R2. But battery is always complete after R2.
             - White v. University of Idaho (R2 not required)- Battery when prof touched student’s back
             - Ellis v. D’Angelo (R2 required for punitive damages not for compensatory)- child who struck babysitter
                 is liable for punitive damages if he meant his battery to be hurtful

         Sarge’s philosophical quandary: Is battery a form of strict liability?
            - Liability found even where contact not intended to be harmful (not fault-based)
            - So we want battery to be fault-based (intent must run to R2) or non-fault (runs to R1)?

         2. Battery: Consent and Medical Consent
                Consent is an affirmative defense to battery.
                Consent needs to be an informed consent.
                       o Doc has duty to inform patient about risks. If not patient can’t give informed consent.
                       o Claim based upon uninformed consent is a negligence claim – malpractice
                Consent is not just a private state of mind. It’s performative, transactional, and communicative.
                   You must communicate your non-consent to have a defense. (O’Brien v. Cunard Steamship)

                    Types of consent:
                          1. Express consent (linguistic transaction)
                          2. Tacit consent (you consent on the basis of your conduct, ex: join game knowing the rules)
                          3. Implied consent (emergency touchings, consent not available in time to save life)

                    Consent to surgery encompasses consent to reasonable extension of surgery in keeping with sound
                     medical judgment (Kennedy v. Parrot) bc in modern surgery, it’s impossible to ask for new consent
                    Consent to treatment does not constitute consent to a medical experiment (Mink v. U Chicago)
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                    Policy Reasons for Requiring Medical Consent:
                         o Utilitarian:
                                  People would stop going to docs if docs could do whatever they wanted
                                  Docs should talk to patients, get more info, make better decisions
                         o Individual autonomy: Offense to human dignity and self determination over own body
                    Sarge: Medical non-consent should be dealt with through malpractice not battery. Judgment
                     of doctors should be based upon subjective familiarity with their patient

    B. Second Intentional Tort: Interference with Property – see Trespass and Nuisance Below

II. NEGLIGENCE: FAULT-BASED UNINTENTIONAL TORTS

                                           Is there liability based on negligence?


                                                                          Phase 3: Look to the connection
                   Phase 1: Look to the D
                                                                                     Legal Cause
                      Standard of Care


                                                        Actual Cause                                     Foreseeability
                   Was B<PL?
                     Posner on Utility               But for the                                      Was the harm
                     Fried on Fairness                defendant’s act,                                  foreseeable in
                                                       would the harm                                    foresight?
                   Should the standard                have occurred?
                    of care be assessed                                                                 Was the act
                    objectively or                    Were there                                        foreseeable in
                    subjectively?                      multiple causes or                                hindsight?
                                                       contribution?
                   Are there industry
                    practices or
                    professional                                                  Phase 2: Look to the P
                    standards that bear
                    on the question of                                                   Defenses
                    due care?

                   Is there negligence                                  Plaintiff’s conduct: C. Neg.
                    per se?
                                                                         Plaintiff’s choices: Assumption of Risk
                   Does res ipsa apply?
                                                                         No Duty to Act
                                                                           No duty to help others
                                                                           No duty without privity
                                                                           Duty to land occupiers


    A. Negligence defined, Hand formula

              Negligence = failing to do something that a reasonable person would do or doing something that a
               reasonable person would not do ―if his own interests were to be affected & the whole risk was his own‖
              Absence of negligence = reasonable care
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           Hand Formula B<PL (Determining Reasonable Care by Balancing Utility)
                    B = Burden of precaution
                            Consider both costs of B to the D and to other people (summer camp case)
                    P = Probability
                    L = Loss
                    Basket of Risk: look at all of the possible PLs, not just the one that occurred in that case
            o Why is it negligent if B<PL?  it’s inefficient, it disregards other people
            o If you can’t even bear the cost that preventing negl. requires, you shouldn’t be doing that activity

Negligence Policy: Right and Utility
            Utilitarian:
                   o Posner:
                           Maximization of welfare
                                     o If we had strict liability it would stop industry from developing
                           Fault based liability through Hand Formula induces actors to take the right level of
                              precautions (tort as regulatory machine)
                                     o Make enterprise liable for neg. and by self interest it will take precaution
                           BPL leads to right level of safety & accidents; efficient balance of risks & harms
            Rights/Fairness:
                   o Kant – moral universe relies upon balance of two forces:
                           Duty of love – take ends of others as your own – force draws us together in society
                           Duty of respect – not using others as means to your end – force pushes us apart
                   o Fried:
                           Absolute right and wrong:
                                     o Wrongs deny others their autonomy
                                     o By intentional harm you devalue V by using them as means to your ends
                                     o When you negligently harm someone you are also devaluing them so it’s
                                        just as blameworthy as if your harm was intended
                           Risk pool: we criticize negligent harming but not non-negligent harming because:
                                     o Reciprocal risks w/in risk pool are OK bc they offset each other. All
                                        impose risks on each other so it’s fair to let loss from reasonable risks lie
                                     o Not assessed case by case, question is if risk is reciprocated over time
                                     o Reasonable risks are offset but if risk is created by negl. not reasonable
                                        and not offset and therefore negl. person needs to pay for harm

        1. Reasonable Care and Culpability: Objective or Subjective Assessment?
             Objective: When judging reasonableness objectively, assume person is ordinary in all respects.
             Subjective: still reas. person but has some characteristics of D; looks at moral blameworthiness
                   o Which characteristics do you take into account under subjective standard? Restatement:
                           Physical capacities. Ex. what would reasonable person w/ disability have done?
                           Sudden incapacitation or loss of consciousness brought about by physical illness.
                                Actor negligent if incapacitation was reasonably foreseeable (ex. seizures)
                           Unless it’s a child, an actor’s mental or emotional disability is not considered
                                     For contrib. negl., don’t consider mental or emotional disability short of
                                         insanity. For compar. fault, do consider mental or emotional disability
                                     Strict liability? D held to a standard he could not live up to?
                                     A child (older than 4?) can be liable for negligence, but to find
                                         negligence, you have to compare his care to the kind of care other kids
                                         his age, development, and experience level would take (subjective BPL)

B. Determining due care
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1. Practice: Customary and Professional Standards
    Posner’s recommendations for assessing the appropriate standard of care:
          o Let the market regulate non-stranger relationships through contract - Market utilitarianism
                   This is subjective BPL decided by parties to the contract
                   If contract doesn’t specify standards, assume customary standards agreed upon
                   Learned Hand says even between non-strangers custom only evidence of due care
          o Let tort regulate stranger relationships – Regulatory Utilitarian
                   Objective BPL – a third party decides the optimal level of safety

           Professional Standards we hold professionals to higher standards of care than others – professionals
            have obligation to represent/protect client’s interests
                o We let professional groups set their own standards bc we can trust standards of prof.
                    groups more than commercial groups. Professional groups involve thoughtful criticism
                    (schools, journals, etc.) and set high standard of care; commerce simply cares about $
                o Prof. standards usually a shield from negl., but some courts allow P to show BPL not met
                         Policy rationale: doc who meets standards is not really culpable, max culpability is
                            error, so holding her liable begins to feel like strict liability; therefore we feel more
                            comfortable when D is regulatory board / standard-setting org and not indiv. doctor

           Customary standards/ordinary care – Treated as evidence of due care, but in most cases reasonable
            prudence is common prudence; however, ―There are precautions so imperative that even their
            universal disregard will not excuse their omission.‖ (TJ Hooper tugboat case)

2. Statutes: Negligence Per Se
      Statutory or regulatory violation by itself = tort negligence (not just evidence of negligence)
      Statutes and regulations are ones that have primary criticism but no compensation provision
      Answer to following questions needs to be yes to find negligence per se:
             o Does statute have safety purpose?
             o Is plaintiff in class of people the statute is meant to protect?
             o Was the injury that occurred the same type of risk the statute meant to prevent?
      Sword but not shield. Statute is a floor but not ceiling (in a defense statute is treated like custom)

             Defenses to charge of negligence per se:
                 o D was reasonable/had good cause to break the statute because following the statute
                     would have put them in the way of the harm that the statute was trying to reduce (Tedla)
                 o Usually courts will accept excuse that at the time you didn’t know you were in violation
                     of the statute (were in violation but not culpable) - keeps negligence per se fault-based
                     (landlord didn’t know paint had lead in it, no negl.) But sometimes non-culpable negl.
                     per se merits secondary crit, becomes strict liab. (brakes fail, statute says must keep up)

             You can also have contributory/comparative negligence per se

             For child, violating a statute does not = negligence per se, evaluated by what reas. child would do

             Policy reasons for neg per se
                  o Predictability
                  o Clear rules – statutes have already made the judgment about what negligence is
                  o Statute creates social expectation of law abidingness

3. Probabilities: Res Ipsa Loquitur – ―the thing speaks for itself‖
            o The accident is of a type that doesn’t normally occur without negligence, and
            o Defendant was in exclusive control of instrumentality (D was active), and
            o Plaintiff was passive (not responsible for causing the accident)
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                Once P establishes these conditions by a preponderance of the evidence (51% probability),
                 burden of proof shifts to D (P-oriented doctrine because P gets break in terms of evidence)
                Res ipsa is a sword but not a shield
                Depending on the jurisdiction, there are doctrines of presumption or inference
                     o Presumption: if P makes a res ipsa case and D doesn’t overcome it, the jury must hold
                         him negligent (possibility of directed verdict)
                     o Inference: if P makes a res ipsa case then the jury can adopt it but is not obliged
                Group res ipsa – If don’t know which D caused harm and there’s ―conspiracy of silence,‖ all may
                 be held collectively liable under res ipsa – Ybarra (surgery neg – but better to hold hospital liab.)
                Last Carrier Rule: last carrier transporting goods is liable for the damage
                Policy Reasons - evidentiary reasons:
                     o Applies to kind of accidents that don’t leave much evidence to establish negligence
                     o Applies to situations w/ info inequalities bc Ds know a lot of info that P can’t access


PHASE 2: LOOK TO THE PLAINTIFF

C. Defenses and Limits to the General Duty of Care Owed to Strangers

       1. Careless Victims: Contributory and Comparative Fault Defense

       We ask here about P’s self-regarding negl. (whether P was reasonably prudent in taking care of himself)

       Basic situation of Contributory negl. is when you have sub-par conduct and causation from both parties

       To determine CNeg ask:
           1) Was plaintiff negligent with respect to the same risk?
           2) Was the plaintiff’s negligence causal?
           3) Then apply BPL

                Classical: Contributory Negligence
                    o Total bar to recovery (also total bar for assumption of risk under this system)
                    o Exception: Last clear chance doctrine – only for CNeg Regime
                              Plaintiff put himself in position of danger by negl., unable to escape or unaware
                              Defendant was aware or should have been that P was in danger and unable
                              D could have prevented P’s injury after becoming aware
                    o Policy reasons:
                              Plaintiff is a but-for cause of his own injury
                              Between two blameworthy people, let the loss lie where it falls
                              Utilitarian arg: creates deterrence for neg behavior of P; P may be CCA
                    o Criticism: It’s not fair!
                              It’s all or nothing
                              It fails to distribute responsibility in proportion to fault
                                        For CNeg, don’t consider mental or emotional disability short of
                                           insanity. For comparative fault, do consider such disability

                Modern: Comparative Fault
                   o Pure compar. fault – liab. proportionate to fault, P’s damages reduce by P’s % of fault
                   o 50% rule of comparative fault (applicable in some jurisdictions)
                           If P is more negligent than D, P is barred from recovery
                           If P is less negligent than D, compare fault and proportion damages accordingly
                                    Con: 50% line seems arbitrary
                   o If the risk of which D was negl. includes chance of 3rd party negl., D still negligent
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                        o Intervening negligent act doesn’t relieve earlier negligent actor of all liability.
                           Earlier negligent actor is charged with the foreseeable negligent acts of others. If
                           intervening negligence is foreseeable, earlier negligence is concurring cause.

               o    How does jury proportion fault? Uniform Comparative Fault Act
                       Was conduct mere inadvertence or was there knowledge or awareness?
                                 Ascending Levels of blameworthiness:
                                         o Error (tried best but made mistake or proved incapable)
                                         o Inadvertence (ordinary negl. – aware or should have been
                                             aware of a risk but not paying attention or not totally aware)
                                         o Disregard (fully aware of risk but proceed anyway)
                       What was the magnitude of risk created by the conduct? (PL)
                       What was the actor attempting to attain?
                       What were the relative capacities (including mental) of the actors?
                                 Differentiate between lay and expert knowledge as well
                       Additional particular circumstances
                       Sarge adds Compare B’s, find CCA

2. Assenting Victims: Assumption of Risk

      Assumption of Risk = Knowledge + Choice to Expose Oneself (Contract-y idea)

      Classical Period of Contributory Negligence: Either CNeg or Assump. of Risk a bar to recovery
          o Reasonable assumption of risk applies only to non-strangers
                    If employer says ―leave or take the risk‖ and you stay, you assume this risk
                            Posner: market utilitarianism reigns bc you are in a contract with employer
                                  o Markets get us to optimal safety-accident level in non-stranger
                                     situations because parties can bargain
                                  o But if the risk affects 3rd parties, go back to regulatory tort model
          o Fellow servant doctrine – If you’re injured by a fellow employee you are barred from
               recovery from your employer bc you assume risks of the workplace that are reasonable
                    Policy Reasons:
                            By working, you assume risk of negl. of co-workers and your employer
                            Employee is getting paid to assume risk
                            Employer and victim are not strangers, they’re in a relationship of contract
                            Employees in best place to know about co-workers’ negl. and prevent it

      Modern Period of Comparative Fault:



                   Contributory                             Reasonable
                   Negligence                            Assumption of Risk

                                      Unreasonable
                                         AR




           o       When there is Reasonable Assumption of Risk – no bar to recovery UNLESS:
                      Express contract  look at contract, tort not involved
                      Inherent risks in activity (Sports)  complete bar to recovery
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                                   Only assume the ordinary inherent risks of the activity
                   o   Contributory negligence is compared in the comparative fault regime
                   o   Unreasonable Assumption of Risk becomes part of Contributory negligence

       3. Non-Responsible Actors: No Duty to Act, Variable
       Full duty of reasonable care as optimal BPL level. Three situations where that duty is relaxed or lessened:

         1. No Duty to Someone in Peril
                Classical system – No duty to aid someone in peril even if the B< PL. EXCEPT WHEN:
                       o Defendant takes charge of the rescue
                              If you have started to help then you have taken on duty
                       o Defendant’s conduct caused the peril
                       o Duty arises from relationship
                              Carrier-passenger, master-servant, business-guest
                       o Reasons:
                              Idea of personal freedom
                              Fiction that law and morality are separate
                                      Classical legal world is worried about enforcing Kant’s duty of
                                         love/obligation to help people, but law is OK with enforcing Kant’s
                                         duty of respect/obligation not to harm people by lack of due care
                       o Somewhat of an erosion of this in the modern world

         2. Landowner’s Variable Duty to People Who Come Onto the Land
                 Within Classical System, sliding scale:
                       o Trespasser – duty have no traps
                       o Licensee (someone who you let on your land but don’t take compensation from) –
                           duty to warn about concealed dangers (dangers P isn’t expected to see on his own)
                       o Invitee (landowner receiving benefit) – duty to keep premises in a reasonably safe
                           condition to prevent injuries. Make situation safe if warning is not sufficient.
                                Landowner’s obligation increases along with getting increased benefit
                 Modern approach: much variation w/in each category, sliding scale only a factor.
                       o Default duty is not to create an unreasonable risk of harm if on balance it can be
                           reduced by physical safety. Make the thing safe if warning isn’t sufficient.
                       o Shift from hard and fast categories to flexible standards of reas. care under circum.

D. Extent and Consequence of Liability for Unreasonable

PHASE 3: LOOK TO THE CONNECTION

       1. Causation of Harm: Multiple Cause, Contribution
             Is defendant’s negligent conduct a factual cause (but for cause)?
             Is defendant’s negligent conduct the legal cause?
        Factual cause – ―But for‖ causation. Necessary cause. There can be multiple but-for/necessary causes.
             o If harm would still have happened in absence of negligence, there is no but-for causation
        Legal cause – a normative, evaluative question. ―Proximate‖ causation.
             o Traditional system- we need to be more than 50% certain that D’s action was proximate cause
             o Enhanced risk system – see Scafidi v. Seiler – Damage should be apportioned to reflect
                 likelihood that D’s neg caused the harm – D pays 30% of damages if only 3/10 likelihood
                       i. Damages limited to the value of the lost chance for recovery attributable to D’s neg
                      ii. If risk enhanced by more than 50%, then can recover 100% from one P

       Joint and Several Liability
             Two tortfeasors, both causally responsible
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              Each liable to P for 100%
              P may collect from either or both, but not more than 100%
              Defendants sort out who owes who what in subsequent contribution proceeding

        Proportionate liability – each D contributed to harm and is liable proportionate to responsibility for injury


Foresight and Hindsight- Legal Cause
       a. Foresight
              a. Ask the question: What would the reasonable person who is alert to taking proper precaution
                   have had in mind as a type of risk that should be guarded against?
              b. Was the injury reasonably forseeable when the negl. conduct occurred/the risk was created?
              c. Questions: At what level of generality? At what point in time?
              d. Sarge’s conclusion:
                         i. Plaintiff: can usually argue that the harm fits into a general class of harms that can be
                            anticipated. Pay attention to the whole package of risks – don’t disaggregate. Just bc
                            the particular part of package is not weighty enough, maybe the package as a whole is
                        ii. Defendant: can usually argue that this was an idiosyncratic situation
                      iii. Like hindsight, it’s subjective, an evaluative framework; foresight is not an algorithm
                       iv. “The Wagon Mound Case” – ―it is not the hindsight of a fool, but it is the foresight of
                            the reasonable man which alone can determine responsibility‖
              e. Dramshop cases: foresight approach. If the risk can be avoided up the chain (by tavernkeeper
                   not selling to minors, ex., who will then harm 3rd parties), then it is negligence not to avoid it
                         i. But injury still has to be of the type that is foreseeable from sale of alcohol to minors
                        ii. Social host exception (ill-equipped to handle responsibilities of guests’ drinking)
       b. Hindsight
              a. Backwards looking
              b. Was the cause close enough to the harm?
              c. Was there a continuous sequence of cause and effect?
              d. Evaluative approach- where to draw the line is a policy question in the hands of the judges
       c. Juries often instructed with both foresight and hindsight
       d. Hypersensitive plaintiffs highlight the distinction between the foreseeability and hindsight test

Compensation
  Compensatory damages – to make the injured party whole (determined by jury)
     1. Medical bills
     2. Wage loss
     3. Pain and suffering
  Punitive damages – appropriate when conduct has the character of outrage frequently associated with crime
              Some courts require recklessness standard for punitive damages, other allow neg standard
              Jones v. Fisher- Malice or vindictiveness not required for punitive damages to be awarded
              Policy Reasons:
                     Old rationale: avoiding private violence (vigilantism)
                     Modern rationale: private attorney generals – encourages people to bring suits because
                        it might make the suit financially worth it
                     Another rationale: deterrence
              No punitive damages in strict liability cases

    Compensation
      a. Purposes
             a. Plaintiff oriented: Make the plaintiff whole again
             b. Defendant oriented: Utilitarian deterrence
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                         i. Under BPL analysis, L=Social cost of accidents and L’ is tort judgment; goal is to
                            make L=L’ – full compensation should be sufficient to deter future bad acts; punitive
                            damages not necessary under Posner’s theory, compensation should rationally deter
        b. Compensatory compensation
                a. Medical costs – estimate annual cost of medical care X life expectancy
                b. Wage loss
                         i. Lost Earnings up to point of jury decision +
                        ii. Expected salary x Working life (years working up to the age of retirement) discounted
                            by chance of being able to work again / what expected reduced wages would we
                       iii. Inputs: education, prior earnings, character
                       iv. For future earnings, damages awarded in current monetary value and discounted by
                            real interest above inflation
                c. Pain and suffering
                         i. Nonpecuniary in nature
                        ii. Includes embarrassment, loss of sleep, ―grievous mental and physical distress,‖ loss of
                            sex powers, spasms, etc.
                       iii. Unlike medical bills and wage loss, reparation is impossible/fictional, offsets
                            injury/loss but doesn’t compensate
                       iv. How much someone would pay you in exchange for the loss
                                 1. Posner thinks correct way is how much someone would pay to accept the risk
                        v. In reality, a made up number (think Buffalo Creek Disaster)
        Christopher v. US – Inexactness of calculation should not be a bar to recovery. ―[T]he risk of uncertainty
        should be thrown upon the wrongdoer instead of upon the injured party.‖

        Should attorney’s fees be awarded? Wouldn’t this make sense in terms of making the plaintiff whole?

        d. Wrongful Death - when victim is killed, damages go to a third party
        1. Types of wrongful death statutes
            a. Survival Statute – transfer to the estate of the deceased rights and liabilities deceased would have
               had if she had lived (extends existing causes of action, regardless of whether D caused death)
            b. Death Statute – recovery for ―relational harm‖ – decedent’s dependents and close relatives recover
               for losses associated with death (creates new cause of action, only applies if D caused death)
        2. Types of damages
               a. Economic loss- pecuniary damages- pecuniary loss to the survivor
               b. Consortium- loss of association
               c. Solatium- emotional damages- several states don’t have solatium damages
        3. Problems with wrongful death
               d. Who can recover?
               e. Zero compensation for loss of life to the one who lost it  optimal BPL levels not achieved

Economic Loss Rule – can’t recover purely economic losses
      Exceptions include where economic loss particularly foreseeable, intentional harms, public nuisance, etc.

III. NO-FAULT TORT LIABILITY – Legal cause still required

A. From Fault to Strict Liability
       1. Insurance
               a. Two types of insurance
                        i. Loss Insurance- first party, includes social insurance
                       ii. Liability Insurance- third party insurance
               b. Logic of Insurance
                        i. Risk pooling- shifts us from a tax-harm system to a tax-risk system: taxes everyone
                           who is taking the risks in theory
                       ii. Tortfeasor’s fear of crushing loss for beneficial activity goes down
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                         iii. Enables people to engage in risk, positive for economic growth and social welfare
                c.   Sovereign immunity gone – can now sue the state, because state has insurance
                d.   Charitable immunity gone – can now sue non-profits, because they have insurance
                e.   Rating
                           i. In theory premium is the risk tax, but impossible because surveillance is too costly and
                              administratively impossible
                          ii. Employ law of large numbers- the basis of insurance- need a large group to predict risk
                         iii. Methods
                              1. Class/Manual rating: uses pooling/averaging principle, but there will be variation
                              within the class btn more and less careful actors, but all are treated same w/in ―class‖
                              2. Merit rating: based on past accident experience
                              3. Schedule rate making- gives plus and minus point for indiv characteristics of insured
                f.   Large actors v. small actors- deterrent pressure felt by class, not individuals within it
                           i. Large actors- greater deterrence as premium based on past and future performance as
                              they are a class to themselves. Very large actors are practically self-insurers; tax risk
                              and tax harm practically the same thing. If improve conduct, rates will go down.
                          ii. Small actor- presence of insurance decreases deterrent pressure because part of a
                              broader class that is pooling risk and will not pay out of pocket; may be under-deterred
                g.   Collateral source rule: if P gets compensation for injuries from a source wholly independent of
                     tortfeasor, such payment should not be deducted from the damages P would otherwise collect

        2. Theory of Activity Liability: Utility
         Claim 1 / Primary legal criticism (of conduct): negligence against the particular defendant
         Claim 2 / Secondary legal criticism: strict liability – the activity was not unreasonable (no
            negligence/fault) but it is unreasonable not to pay for the harms.

           Basis of strict liability: Rylands v. Fletcher: person who for his own purposes brings on his land
            something likely to do mischief if it escapes must keep it in at his peril (and pay for harm if it escapes)

Rationales for strict liability:
             Background safety/CCA
             Market allocation
             Spreading (utilitarian)
             Spreading (fairness)

I. Utilitarian
    a. Calebrisi, unlike Posner, believes strict liability is the way to reach the ultimate BPL level
    b. Essentials
             a. Risky activity should pay for its characteristic risks
             b. Business should internalize costs
             c. Activity liability is better means of achieving background safety
             d. Activity liability is better at market allocation, spreading costs
    c. Primary costs v. secondary costs
             a. Primary- Bs and Ls, the cost of precaution and the cost of the accident, costs out of court
             b. Secondary- costs of restitution, what is paid after the accident, L’
                       i. Can get to zero if spread enough, as through insurance
             c. Tertiary costs- overhead costs/administrative costs
    d. Strict liability v. fault
             a. Distributional difference in who pays
                       i. In fault liability victim pays for failure to adopt B that is greater than PL
                      ii. In strict liability risk taker pays regardless
    e. Background safety- in reference to primary costs
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            a. Makes manufacturers examine processes, look deeper in the wedge to reduce # of accidents. SL
                influences companies to spend more on R&D to prevent accidents. Mobilizes systematic changes.
            b. Why fault liability can’t go deeper into the wedge: really expensive, difficult to show negligence
            c. Target the CCA- Most costs arise at the intersection of multiple activities, so which activity is to
                blame for the resulting harm? Answer: should attribute costs to the Cheapest Cost Avoider (CCA)
                      i. Cognitive CCA – best position to identify the risk
                     ii. Operative CCA – best position to remedy the risk
                    iii. Structural vs. situational- structural CCA should bear the costs, large actor over small actor
                    iv. Use categories to determine and apply strict liability rules re: the CCA (i.e. between cars
                         and bicycles, cars are liable). This saves tertiary costs in adjudication
    f.   Market allocation- in reference to primary costs
            a. Industry can spread costs to consumers
            b. If characteristic accident costs, let the activity pay for them
            c. The market will deter excessively dangerous activity
            d. If costs too high, no one will buy your product
            e. Substitutes market criticism for judicial criticism

    g. Spreading
           a. Marginal utility of money: easy for everyone to pay out a little bit than for harm to be concentrated
           b. Justify on utilitarian grounds, not on grounds of justice. Secondary costs can be avoided by loss
               insurance (by victim) or liability insurance (by actor)
           c. Strict liability better than fault liability because it returns accident costs to activities that give rise to
               them and those actors can spread in different ways
           d. Between actor spreading and victim spreading, we should always prefer actor spreading because,
               we can influence reduction in primary costs
        1. Large actors can absorb cost and spread through profit or price
        2. Small actors can join insurance pools and end up spreading in the same way – they pay the premium
            and bear the accident load among themselves
        3. Imposing liability on actors mobilizes spreading costs
        4. Don’t want to externalize accident costs from the activities that give rise to the accidents
        5. If accident costs paid by power company for blasting, than costs of doing business goes up
        6. If victim shoulders cost of blasting accident, then not giving company incentive to change behavior
    h. What we get from strict liability regime
           a. Reduction of total overhead of tertiary costs
           b. Spreading to reduce secondary costs
           c. A better system than fault at lowering primary costs (background safety and market allocation)

II. Fairness
        Fletcher – SL Fairness Justification: Theory of Reciprocity (Equality of Risk)
              Looks at the risks before anyone is hurt
              Fairness = people in social life mutually or reciprocally imposing risk upon each other (a highway)
              In a world of perfect reciprocal risk, no strict liability, only negligence liability
              Equality of risk is not determined situation by situation or systematically. It is determined
               categorically (middle approach). So you think about situations where risk is not reciprocated –
               abnormally dangerous activities §§ 519 and 520.
              Law should develop categories of non-reciprocated risks (ex. abnormally dangerous activity)
              Counters:
                    o Limited theory of strict liability because it doesn’t justify vicarious liability, products
                       liability, workers comp, and auto no-fault.
                    o Focuses on unequal RISK but doesn’t talk about unequal HARM
        Bohlen – SL Fairness Justification: Theory of Proportionality
              Looks at the harms after they occur
              Asks: is that harm distributed proportionate to the benefit received from risk creation?
                                                                                                                      12

                Fairness spreading: Fairness requires that the beneficiaries of the risky, harm-producing activity
                 should bear the burden of that activity (internalize the costs). The burden should be spread among
                 beneficiaries proportionate to benefit reaped.
                Same outcome as Calebresi with a different justification

3. Vicarious Liability (Strict): Employees, Contractors, Others
1. Types of vertical vicarious liability:
        1. Servants on behalf of masters  strict
           Master is liable for servant’s torts if servant is acting within scope of employment
                o Employer assumes employee’s risks because he directs the servant’s activities
                          But not vicariously liable for employee’s criminal activity
           Victim can sue servant too (for negligence) but he can only get the total damages due, no 2x recover
           Posner says to determine if the tort occurred within scope of employment: it’s within the scope of
              employment if liability would induce the master to change risky behavior (policy rationale that looks
              at economics, CCA background safety rationale like Calebrisi) (Konradi case)
           Fairness argument for vicarious liability – B > L, however, harm is foreseeable because it’s a
              characteristic risk of the activity, therefore, employers should be strictly liable, doesn’t have to be the
              CCA that pays for it because that’s not fair
        2. Masters usually not liable for independent contractors. Subject to exceptions:
              1. Employer retains control over details of the work (Sarge: not a real exception because legally
                  they’re more like an employee)
              2. Contractor is incompetent (Sarge: also not a real exception bc employer negligence in hiring)
              3. Performance of contract involves inherently dangerous activity that contractor does negligently
                a. Non-delegable duty for inherently dangerous work
                      1. Utilitarian argument that it mobilizes employers to be safer through strict liability
                      2. Fairness: if you’re beneficiary of the risk you should be liable even if you contract out

3. Horizontal vicarious liability- among agents who are equal participants in a common venture

B. Liability for Reasonable Risk: In General

        1. Strict Liability: Classical, Abnormal Danger
        Abnormally Dangerous Activity Liability

        Restatement of Torts, Second:
          § 519: General principle of strict liability
             (1) If activity is abnormally dangerous, you’re liable even if you’ve exercised utmost care
             (2) Limits liability to the kind of harm that was foreseeable
          § 520: Defining abnormally dangerous activities
        BPL Factors defining: (a) High degree of risk
                                  (b) Likelihood that harm will be great
                                  (c) Reasonable care won’t eliminate risk
        Abnormality: (d) Not a matter of common usage
                        (e) Inappropriateness to location
                        (f) Value to the community outweighed by dangerous attributes

        Rationale: If the activity is so unusual, you have a responsibility to pay its way.

        Consensus in courts is that a-c are weighted more heavily than d-f.
                    C-Neg not a defense
                    Assumption of risk can be a defense to strict liability for abnormally dangerous activity
                           Exception: P’s act was not voluntary bc either trying to protect himself from harm
                               or he trying to exercise a right of which the defendant had no right to deprive him
                                                                                                                   13

                   One justification for abnormally dangerous SL: evidence of negligence often destroyed
                   In the case of an abnormally dangerous activity, the defendant is usually in the best
                    position to spread the loss and improve background safety.
                   The D may not be operative CCA but they might be cognitive CCA. If you hold cognitive
                    CCA liable then they can pressure operative CCA (in contract–market relationship)

2. Trespass and Nuisance – harm to property
    Trespass has to do with one’s right or interest in exclusive possession of land
    Nuisance has to do with one’s interest in use and enjoyment of land


    Trespass v. Nuisance
        Question of reasonableness  nuisance.
        Nuisances can also be trespasses. Only light and sound can be a nuisance and not a trespass
        Something can be both a nuisance and a trespass when the fallout rises to a level where it
          substantially interferes with the exclusive interest in possession (Martin). Fallout is on a spectrum
          that can range from interference with use and enjoyment to interference with exclusive possession

            Count 1 [primary criticism]     Count 2 [secondary criticism]

            B < L  injunction              Damages

            B > L  no injunction           Damages


    Trespass
    Trespass is wrongful entry into someone else’s space. Its elements are:
           (1) Intentional entry into someone’s property
           (2) Lack of consent for boundary crossing

    For trespass, intent must travel ONLY to R1 for liability:
    ACT  R1 (intentional entry into pvt space)  R2 (wrongful character of entry)  R3 (spec. inj.)
        o Trespass could be entry of a physical thing (contaminated water) into private space, not nec. person
        o Innocent trespass, mistakenly believing there was consent, is not a defense. Strict – no fault req’d
                 Exception: Cleveland Park Club v. Perry- Whether child trespassed intentionally or as a
                     matter of negligence, may consider the child’s age experience, and knowledge
     If it’s a trespass you have to enjoin

    Nuisance: continuous activity causing a bad side effect

    Elements of nuisance:
       (1) Intentional interference – purpose or knowledge
         Intentional in nuisance means ―intentional interference w/ use and enjoyment of property‖ – just
            knowing that chemicals will migrate somewhere under the earth isn’t knowing there’s any harm
            that will befall someone; so no requisite intent (to interfere with neighbor), but this is debatable
       (2) Substantial injury – tangible property damage
                i. If the injury is physically tangible→ it’s substantial
               ii. If the injury is intangible, but reasonable person wouldn’t like it → it’s substantial
       (3) Unreasonableness – of conduct (claim 1) or injury (claim 2 – strict nuisance)

          Nuisance must be offensive to a person of ordinary sensibilities (not just a strange allergy)
          Private nuisance: affects a smaller group of people, the individuals sue on their own behalf
                                                                                                                14

         Public nuisance: affects a large number of people, gives the attorney general a right to sue, as
           well as individuals specially injured from a public nuisance more than the rest of the general
           public
         Defense: “coming to the nuisance”. If the nuisance conforms with the character of the locality,
           maybe the plaintiff shouldn’t be there. Key question: to whose activity do we attribute the harm?
           The plaintiff coming to the spot or the defendant causing the fallout?

   Restatement § 826 says nuisance is unreasonable if:
             (a) Gravity of harm outweighs utility of conduct
                      i. Sarg: injunction provision, if it’s a negl. nuisance we enjoin the conduct (primary)
             (b) Where the harm is serious but not necessarily greater than the utility of the conduct, but the
                 financial burden of compensation wouldn’t destroy the enterprise (secondary criticism)
                      i. If cost of compensation is so high that it would shut down the business then the
                         utility of the conduct will never outweigh the gravity of the harm. If the activity is
                         worthwhile it can pay it’s way, if it can’t pay it’s way then it is not worthwhile

   Primary Criticism/Fault Based Nuisance
        Nuisance claim 1: negligence, apply BPL, think about harm and burden
        Boomer overrules the entitlement approach for nuisance and replaces it with a balancing approach.
                    o The balancing approach – if the cost of the injunction B is greater than the benefit of
                       the injunction L then the activity should continue but pay its way, because as B is
                       greater than L, they’ll pay out L and they’ll continue to operate (secondary criticism)
                             Problems with this arg: but the entire L is not being captured in the suit.
                                Because it’s only the L of the people bringing the suit, but it might be
                                affecting more people.
                             A utilitarian point of view would weigh all possible L’s.
                             Better scenario is for company to buy the land and arrange for permission in
                                the first place.
                             Granting injunction would make parties settle for the real value of it to them –
                                market approach here trumped by regulatory approach
                                     But if one P held out on settlement, wouldn’t work and injunction
                                          would go through

   Secondary Criticism/Strict Nuisance
        Intentional harming (Foreseeability / knowledge to a substantial certainty)
        Substantial (unreasonable) harm to reasonable/ordinary man standard
        Causation
        BUT activity is not BPL unreasonable (no fault)

   When it’s a strict claim for nuisance, contributory negligence is not a defense.

   Types of strict nuisance:
       Abnormally dangerous activity - STRICT
       Intentional interference (purpose or knowledge) – STRICT, unique to nuisance
               o Person knows what’s going on, it is causing substantial damage, and the activity may be
                    perfectly reasonable but since it’s causing damage you should pay for what’s going on

   Strict Nuisance Policy Rationales:
   o See Strict liability rationales PLUS
   o Rock bottom fairness rationale: even if you’re not enjoinable, it’s not fair for you to get the good and
       dump the harm

3. Privilege
                                                                                                                    15

               Privilege is a defense to intentional torts (private necessity/emergency situations)
               Imperfect privilege: Even if defendant had privilege, and nothing wrong with his conduct (no
                primary criticism), he can still be held strictly liable according to secondary criticism (something
                wrong with failure to pay damages) (Vincent v. Lake Erie).
            Classes of privilege, allowing the purposeful invasion of someone else’s property:
                        1. Public takings- govt is empowered to take property for public use
                        2. Public necessity- authorizing the destruction of property to safeguard the public good
                        3. Private necessity- permits a private actor to enter and use another’s property without
                        consent in certain circumstances
                                   Ploof v. Putnam- (sloop moored to dock) For protection of property and the
                                       preservation of human life if no other options were available, P was
                                       privileged to dock, D liable for unmooring boat
            Privilege of public necessity also subject to secondary criticism. If public project is beneficial to
                everyone, the burden can’t be concentrated upon one member of the public but must be spread
                among all beneficiaries. (Wegner)
                     i. Today privilege of public necessity is exceptional and ltd.; in core torts rights trump utility
            Policy reasons: Fairness:
                             a. Strict liability because when you utilize someone else’s property in your interest, if
                                 in the process the property was damaged, you have to pay
                             b. Distribution of burden
        Public Takings:
        Monongahela Navigation Co. - Power of Congress to take property is subject to limit of just compensation

        Wegner v. Milwaukee Mutual- In situations where innocent third party’s property is taken, damaged, or
        destroyed by the police in the course of apprehending a police suspect, the municipality should compensate
        the innocent party for the resulting damages

        Private Takings:
        Reasoning from Crescent Mining-bad law now
        Factors court considers when deciding whether to grant an injunction:
        1. Probability of irreparable injury
        2. Inadequacy of pecuniary compensation
        3. Prevention of a multitude of suits

        B                        >       L
        Cost of injunction       >       Benefit of injunction
        Utility of Conduct       >       Gravity of Harm

C. Products Liability
A modern claim for products liability can contain both Claim 1 (negligence) and Claim 2 (strict) or just Claim 2

        1. Products Liability: Contracts or Tort
             Products liability addresses liability of a manufacturer to a consumer when there’s an intermediary
             Four Phases:
                       1. Privity of contract – no recovery for parties not in contract
                       2. Negligence / tort – recovery if the manufacturer was negligent
                       3. Warranty / contracts – recovery because implied warranty
                          Contract of safety runs to customer
                                 This is a form of strict liability in contract. Diff between this phase and the
                                    next one is that implied warranty can be waived because it’s contract
                       4. Strictness / tort – mfr. strictly liable for injuries resulting from defective products

            STAGE 3 – Contract Warranty Liability
                                                                                                          16

      Uniform Commercial Code (Regulates Warranty Contracts)
          o Warranty provisions of the UCC assumed unless parties specify otherwise in their contract
          o UCC §2-313 – express warranty can be an affirmation of value, a promise, a description of
              the goods, a sample or a model
          o UCC §2-314 – implied warranty of merchantability (safety)
                 §2-314(2)(c) – product is fit for ordinary purposes for which such goods are used
          o UCC §2-316 – you can entirely opt out of this or not at all (all or nothing)
                 The opt-out is the only thing that distinguishes the implied liability regime from strict
                    products liability in torts
          o UCC §2-318– implied warranty of merchantability extends to anybody expected to use,
              consume, or be affected by the product
          o UCC §2-719(3) – waiver of personal injury damages is ―prima facie unconscionable‖

    Contracts waiving implied warranty of merchantability must reflect real equality of bargaining
     power between parties, otherwise they are unenforceable
         o No standardized waivers of implied warranty because no equal bargaining power so
             contract is imposed (substantive unconscionability) or true meeting of the minds
             (procedural unconscionability) (Heningson)
                This moves us closer to tort strict products liability
STAGE 4 – Strict Tort Liability
    Consumers cannot inspect all products in the market today bc of mass marketing and distributive
     systems so mfrs are CCAs and should be liable if products injure (Traynor, Escola v. Coca Cola)

      Restatement of Torts, Second §402A – one who sells a product in a defective condition
       unreasonably dangerous to the user or consumer is subject to liability for physical harm caused to
       the ultimate user or consumer or to his property if:
           o The seller is engaged in the business of selling such a product
           o It is expected to and does reach the consumer without a substantial change in the condition
                in which it is sold
       And this rule applies although:
                 The seller has exercised all possible care
                 The user has not bought product from or entered into any contractual relation w/ seller

      The triumph of tort over contract in products liability is not complete in two ways.
          o Doctrinal: Outside physical harm (which is the core area of torts), in field of economic
               harm (like when product stops working), contract dominates
                  Economic Loss Rule – where the defective condition does not lead to personal
                      injury or loss of property beyond the product, no tort recovery, contract governs
          o Policy: contract theory and ideas about choice still influence policy debates within tort
               strict product liability

2. Justifications for Strict Product Liability
     Background safety / CCA – looks forward to change behavior in future
             o Stimulating the company to do investigation on how to make the product safer, R&D,
                 monitoring the effects of the product
             o CCA – losses should be borne by party in best position to do cost-benefit analysis
                 (cognitive CCA) and act on it (operative CCA).
                    Maybe CCA is the manufacturer
                    Maybe CCA is party in the middle of the chain of commerce because they’re in best
                       position to bargain up and down and affect the most ppl’s behavior
     Market Allocation – looks forward to changed behavior in future
             o A product’s price should reflect all its costs including accident costs (externalities)
                                                                                                        17

            o  Responsible companies that do R & D should not be punished—cost cutters will incur
               costs on the back end
       Spreading / Fairness – looks backward at how to finance accident
           o The ones who profit from the risk should pay
           o Losses should be borne by party that can equitably distribute losses when they do occur
                  Manufacturers can spread cost to buyers who benefit from use of product

3. Manufacturing and Design Defects
Negligence targets conduct of manufacturer; strict liability targets product defect.
A defective product should pay the accident cost. Product can be defective in two ways:
     Manufacturing Defect: product is a lemon, doesn’t work as it’s supposed to, different from other
       products in the same line
     Design Defect: when produced as it is designed, the entire line is defective
            o Burden of Proof –Plaintiff must either demonstrate product fails expectations test OR that
                she as proximately injured by the product and defendant fails to pass the balancing test.
                     Expectation Test – does the design of the product meet the safety expectations of
                        the average consumer? (warranty based)
                             Strict because it doesn’t care whether manufacturer knew, reasonably
                                could have known, or should have known
                             Test is a floor not a ceiling, if you pass it (ex: obvious danger) you could
                                still fail the balancing test
                             Policy Rationales:
                                      o Forward looking: CCA/market allocation
                                                CCA: Stimulate safety research
                                                Market Allocation: Responsible companies that do R & D
                                                   should not be punished—cost cutters will incur costs on
                                                   the back end.
                                      o Backward looking: spreading and fairness
                     Balancing Test – is the design of the product reasonably safe, or do its risks
                        outweigh its utility? (negligence based)
                             Strict because it’s a hindsight test: if manufacturer had known what we
                                know now, would they have put the product into the stream of commerce?
                                Doesn’t matter that they could not have known at the time based upon
                                scientific knowledge then
                             Factors to be considered:
                                      o Usefulness of product
                                      o Availability of other safer products to meet the same need
                                      o Likelihood and probable seriousness of injury
                                      o Obviousness of danger/consumer assumption of risk
                                      o Common knowledge / public expectation of danger
                                      o Avoidability of injury by care and use of product (instructions,
                                           warnings)
                                      o Ability to eliminate danger without changing usefulness or price

4. Duty to Warn
       Third Restatement – products liability where product is unreasonably dangerous.
             o Seller may have duty to warn, but not where product is only dangerous when consumed
                in excessive quantity, over a long period of time or its dangerousness is generally known
                (negligence approach to warning)
       Claim 1: negligent failure to warn
             o Manufacturer knew or reasonably should have known (ex: didn’t have adequate research
                program) and should have warned
             o MacDonald v. Ortho – negligent failure to warn
                                                                                                         18

                          ―Learned intermediary‖ defense – where doctor or equivalent professional has
                           been warned and they are making the decision for you
                                 Here N/A bc choice to take birth control is patient’s more than doctor’s
                                 Not relevant if pharmaceutical is marketed directly to potential users
                        D liable because they knew of the risk of stroke
                        Warning must be understandable to audience (―stroke,‖ no jargon)
         Claim 2: strict duty to warn
              o If D had known what we know now, would their conduct have constituted negligence?
              o Strictly liable even if mfr. shows scientific knowledge was unavailable at the time
                  (Beshada) – however, Shanks v. Upjohn took a different approach, said scientific
                  unknowability was an excuse (bc not just wasn’t known, but couldn’t have been known?)
         Goals of warning:
              o Stimulate personal choice to use product
              o Stimulate precautions the user can take to protect against risk of product
         Even if the risk was unknown to the manufacturer, can be liable under
              o Affirmative misrepresentation (ie: saying this product is not addictive but turns out it is)
              o Strict liability (See claim 2)
              o Negligence (See claim 1)


5. User Conduct
       Second Restatement – misuse of the product is a bar to recovery for the plaintiff, but products
         liability is strict so no ordinary contributory negligence
       Third Restatement – allows comparative responsibility to reduce damages, product should be
         designed to avoid expected mistakes, only unexpected bizarre misuse is a bar to recovery
       Safeguard Problem: If the cost of the safeguard to avoid unreasonable harm is less than the cost
         of using the machine with caution and the use is unintended but reasonably foreseeable, then the
         manufacturer is liable. (Micallef)
             o You would think the CCA would be the user in Micallef case, however because there is
                   only one company, and there are lots of different users, manufacturer is the structural
                   CCA, user is the situational CCA

6. Cold Calculation and Punitive Damages
       When a company shows callous disregard of a substantial likelihood of injury to others then they
         can be liable for punitive as well as compensatory damages
       Two ways to value life:
             o Societal cost (utilitarian method) – lost production
                       Counter argument: undervalues people
             o Implicit valuation – what people would pay to avoid death, what risk employees would
                  except for pay
       Buchanan – defense of caveat emptor (buyer beware) – strict liability destroys choice in the
         market
             o if you’re less risk averse as a buyer or poor you should be able to buy cheaper, less safe
                  products
             o Sarg’s critique:
                       Buchanan assumes that when people buy, safety is the only factor affecting
                          product price, but consumers are thinking of other factors as well, so you can’t
                          argue that they have knowledge of the risk they’re taking.
                       Also, buyers aren’t the only people affected by a product.

7. Collective Cause
       Collective responsibility – idea within mass torts that user doesn’t know which manufacturer
          made the product he used – how to apportion liability?
                                                                                                                              19

                                o    Market Share
                                         Sindell – apportion responsibility among manufacturers proportionate to market
                                             share
                                         Condition: you must have the bulk of the market joined in the case (~75%)
                                                  Some jurisdictions only allow recovery proportionate to the amount of
                                                      the total market share represented by joined defendants – others will
                                                      allow full recovery
                                         Criticism: market share liability violates the requirement of causation in fact
                                             (―but for‖)
                                         Holds the market, rather specific actors, liable
                                o Other methods:
                                         Select a single manufacturer to be responsible
                                         Look at geography of plaintiff and target manufacturers selling in that area
                           Collective harm – if injury takes a long time to reveal itself, you may not be able to connect
                            specific cause to the injury – how do you determine liability when many possible causes?


IV. Beyond Tort Liability Compensation Systems

                1. Mechanisms of Accident Law: Four Principles of Compensation

       Reparation system: aims to compensate and regulate (compensation  regulatory pressure)
                     TORT ADJUDICATION                                     NON-TORT PLANS

           a)   liability rules                                     a)       attribution rules
           b)   adjudicatory process                                b)       administrative process
           c)   tort damages                                        c)       compensation limits
           d)   financing left to defendants                        d)       financing specified
                                                            EXAMPLES

       1. Fault Liability                                            3. Activity plans: actor-financed

               the negligence system (plus liability insurance)            Actors contribute to fund for accidents
               e.g. rail collisions, medical accidents                      characteristic of an activity
                                                                          Victims recover on non-fault basis
                                                                          e.g. workers comp
       2. Activity (Strict) Liability                                4. Activity plans: victim-financed

               4 forms:                                                    Potential victims of an activity contribute to
                    o vicarious liability (hybrid)                           fund for characteristic accidents
                    o nuisance                                              Non-fault recovery
                    o dangerous activity (e.g. blasting)                    e.g. auto no-fault
                    o products liability (e.g. drug manuf.)


           1. Background institutions: do either compensation or regulation, not both
                      COMPENSATION                                              REGULATION

          Compensation for misfortune out of contributions            Regulation of risk apart from compensation of
           not tied to particularly risky activities                    victims (here ignoring nongovernmental and
                                                                        indirect governmental promotion of safety)
                                                                                                                20

                                                   EXAMPLES

5. Choice: Private loss insurance                          7. Government regulation

       Victims contract for insurance (purchase,                Safety norms enforced by officials through
        collective bargaining) covering generic                   criminal process, licensing, inspection, admin.
        misfortunes                                               fines and orders
     e.g. medical, disability, wage-continuation                e.g. (federal): EPA, NHTSA, CPSC, FDA,
        coverages                                                 OSHA, MSHA
     Health insurance puts no pressure on the actor to
        reform.
6. Need: Govt. benefit programs

       Taxation finances social insurance and welfare;
        varying eligibility rules cover accident victims
       e.g. (federal): Medicare and Medicaid,
        unemployment and disability benefits, SSI and
        other welfare


            a. Ex: SSDI: compensates, but no regulatory pressure bc is payroll tax
            b. Ex: private loss insurance compensates blasting victim but doesn’t put regulatory pressure on
               blasting because loss not calculated by amt of risk thrown out

    2. Tort vs nontort
           a. Tort is liability rules; Nontort is attribution rules (workers’ comp)
                     i. Objective of nontort is to have a broad, easy to apply rule
           b. Tort is formal adjudicatory process; nontort is informal
           c. Tort is all damages; nontort (workers’ comp) doesn’t give pain and suffering, is case-by-case
           d. Tort leaves financing to Ds; nontort specifies the financing
    3. 4 principles:
           a. Fault: faulty activity should pay for harms it causes
                     i. Negligence system
                    ii. Liability insurance
           b. Activity: risky activity should pay for harms it causes
                     i. Vicarious
                    ii. Nuisance
                   iii. Dangerous activities
                   iv. Products liability
                    v. Workers’ comp (actor-financed)
                   vi. Auto no-fault (victim financed)
           c. Choice: get what you bargained for – Buchanan, Caveat Emptor
                     i. Private loss insurance
                    ii. Matter of individual choice, not social obligation
                   iii. Deborah Stone: AIDS and Moral Economy: loss insurance shouldn’t be personal protection
                        (standpoint of choice; premium based on person’s risk) but mutual aid (standpoint of
                        need): fortunate should contribute to help compensate/offset misfortunate few
           d. Need: basic needs of everyone in society should be met
                     i. Government benefit programs: Medicare/Medicaid, unemployment, SSI, welfare
                    ii. Only requirement for recovery is being a citizen and generally needier
                   iii. Support is a matter of social obligation/responsibility – fortunate many help out
                        unfortunate few
    4. 3 principles of compensation: - Keeton
                                                                                                                    21

            a. Fault: BPL, unreasonable risk
            b. Strict accountability: internalization and spreading, market allocation. Commonly excludes
               compensation for pain and suffering
                     i. Abnormally dangerous activities: blasting, transporting gas
                    ii. No fault auto insurance
                   iii. Nuisance
                   iv. Products- companies depend on liability insurance or self insurance if they are very large
            c. Welfare
                     i. Conduct of actor is socially beneficial, so compensation to be paid by society through
                        representative gov’t entity
                    ii. Illness, misfortune, accidents
                   iii. Not full recovery – just gets victim to basic level
            d. Fault and strict not in conflict –they compete for dominance in current mixed system

2. Activity Plans: Workplace Accidents, Vaccine Injury
Actor-Financed Activity Reparation Plan: Workers’ Comp
    1. actors contribute to fund for accidents characteristic of an activity; victims recover on nonfault basis
    2. with compensation limits
    3. rationale:
            a. cost internalization: employer can protect self against loss by insurance
            b. cost spreading: employer can add to cost of product to buy that insurance
            c. fairness: beneficiaries should bear burden of risky activity
            d. negligence law failed to remedy big economic/social problem of industrialization – pecuniary
                recompense for industrial accidents
            e. market allocation/spreading: personal injury losses bc of accidents are part of cost of production
    4. Historical development:
            a. Classic legal thinking was shocked by it: Ives v South Buffalo Railway: NY workers’ comp was
                constitutional violation of 14th amendment due process. No liability without fault. To take property
                without either fault (tort) or consent (contract), it’s due process violation.
            b. Then, displaced fault-based common law: NY Central Railroad Co v White: NY const. amended to
                allow workers’ comp. US SC says constitutional bc: it abolishes some rules in favor of others,
                recovery is limited, loss has to fall somewhere, leg. wants to prevent pauperism, like exercise of
                police power. Assumes the increased cost to the employer will be reflected in the wages.
    5. Characteristics:
            a. Broad coverage: all injuries arising out of employment, without fault
                     i. Avoids tertiary costs
                    ii. Positional risk doctrine: an injury arises out of employment if it wouldn’t have occurred
                        BUT FOR the fact that the conditions and obligations of the employment placed P in
                        position where injured.
                             1. Whetro v Awkerman: businessmen injured on trip by tornado.
                             2. or employee who fell when taking trash out
                             3. rationale: burden to be on the industry, not the P
                             4. occupational disease is a problem for positional risk doctrine.
            b. Simplified process, informal fact-finding, etc. – also avoids tertiary costs
            c. Compensation limits:
                     i. full recovery of med and rehab
                    ii. limited recovery of wage loss
                             1. temporary total disability: disabled for small period of time
                                      a. scale-down: percentage of lost earning is compensated, not total (abt 80%)
                                           – affects low-wage earners most
                                      b. maximum: upper limit. Affects high-wage earners. (abt average weekly
                                           wage for state)
                                                i. states often have minimum as well
                             2. permanent total – minimum and max limits
                                                                                                            22

                        3. permanent partial = permanent impairment (not a disability because doesn’t
                            affect ability to earn wage, just physically impaired)
                                a. tort would give pain and suffering
                                b. uses schedules to determine how much total functioning of person
                                     impaired
               iii. no recovery for pain and suffering
               iv. rationale:
                        1. practical/administrative issues: takes time to find negligence and pain & suffering
                            damages
                        2. scale down: incentivize people to go back to work
                        3. maximum limit: to reduce pauperism; - need (there’s a maximum responsive to
                            need), principle of choice (private loss insurance is available to rich people)
                                Torts                                          Workers Comp
                Full medical                               Full medical (occupational rehabilitation, goes
                                                                above and beyond)
                Full wage loss                             Limited wage loss (minima and maxima—scaled
                                                                down, ceiling)
                Individualized pain and suffering          No individuated P&S (schedules for recovery
                                                                even if no permanent ―disability,‖ alternative
                                                                approach from AMA based on degree of whole-
                                                                person impairment)

        d. Insurance planning: object was to make employers maintain sufficient insurance
        e. Rationale: cost-internalization  spreading EXCEPT compensation limits. Rationale for
           compensation limits is broad attribution rules (―arising out of‖)
6. 5 problems of workers’ comp:
        a. How to define ―arising out of‖?
        b. What tort actions survive? (against employer for intentional tort? Suit by family?)
                 i. Family might still have tort suit for loss of consortium/society
        c. Suits against third parties from job injuries – product mfr
                 i. Pratt v Liberty Mutual Insurance Co: P injured from repetitive lifting on the job sued
                     insurance co (couldn’t sue employer bc of workers’ comp); Court allowed suit for
                     negligent inspection because insurance co was structural CCA, they knew more about the
                     risk than the employer, employer relied on their risk evaluation, and they regularly
                     inspected and provided recommendations
                     Adopted second restatement of torts 324A: one who undertakes to render services to
                     another which he should recognize for the protection of a third party from physical harm
                     may be liable from his failure to exercise due care in the undertaking if:
                     a. his failure to exercise due care increases the risk of such harm
                     b. he has undertaken to perform a duty owed by another to the third person
                     c. the harm is suffered because of reliance of the other or the third person upon the
                     undertaking (this establishes proximate cause)
        d. Coordination of workers’ comp and tort liability from 3rd party (mfr)
        e. Health injuries: occupational disease, problem of causation
7. rationale for and success of workers’ comp:
        a. utilitarian rationale for manual rates: read S-p
                 i. market allocation (inter-industry) achieved
                ii. cost-internalization: if firms pay the same, there will be variation between more and less
                     safe, so doesn’t work inter-industry
               iii. manual rating more accurate for large actors (law of large numbers), you cant get accurate
                     experience ratings for small actors
               iv. background safety: better for large actors
        b. effectiveness:
                                                                                                                       23

                      i.small firms safe (face-to-face incentive to care),
                     ii.medium firms least safe,
                    iii.large firms safe (cost pressure from market)
                    iv. Workings of the safety incentive
                            1. Experience-based premium rate (merit rating): assuming internalization, less safe
                                 firms pay more, spreading to the consumer. If prices of all industries reflect
                                 relative safety rate, market will tend to channel towards industries w/ lower rates
                                 (channel towards safety).
                            2. BUT this depends on accuracy of rating; experience rating makes sense
                                 statistically for larger firms but not smaller firms
                                      a. Within an industry—would expect the larger the firm, the safer it is
                                          (incentive for big firms to be safe within industry). In reality, though, it’s
                                          not a linear relationship.
                                                i. Even so, there’s a definite shape to it—riskiest workplace is
                                                    around 75; after that point, the larger the firm size, the lower the
                                                    accident cost is. Sarge’s theory—smaller firm size; face to face
                                                    interaction safer, worse as firm gets bigger.
National Childhood Vaccine Injury Act, 1986
     A number of children have bad reactions to their vaccines. Those children’s families were suing vaccine
       manufacturers, driving up the costs of vaccines and putting manufacturers out of business.
     Solution: children injured from the vaccine must seek compensation under Act’s no fault compensation
       plan which limits recovery. Punitive damages are not allowed and death benefits are fixed at 250k and pain
       and suffering at 250k.
     Compensation will be paid from a Trust Fund funded by taxes on the vaccine.
     Petitioner may reject to be compensated under the act and may pursue tort with certain exceptions
     Act does no affect the tort rights of the sufferer’s family member
     Problem of attribution: This type of plans creates a disincentive for a particular company to engage in R&D
       to prevent injuries.
     Good for market allocation, good for tertiary costs. Not good for background safety.

3. Activity Plans: Auto No-Fault, An Omnibus Plan

    1. Characteristics (similar to workers’ comp):
            a. Broad coverage rule
            b. Simplified process
            c. Compensation limits
            d. Insurance program
            e. Intentional tort preserved
                      Workers’ Comp                                              Auto no-fault
   Covers an ―activity‖                                        Covers individual motorists in stranger relationships
   Covers people in employment relationships
   Abolishes all injury-related tort recovery against          Retains tort liability above a certain threshold **
    employer
   Heterogeneous                                               Huge variety of plans
   Turn to someone else to collect (employer, and if           To recover, go to your own insurance company
    they contest it, to the Workers’ Comp Board)
   Covers only employees, no third parties.                    Would cover a 3rd party injured in the accident (i.e.
                                                                 a pedestrian)
   All 50 states have adopted                                  1/3 of states adopted (p.1187)

Rationale: it would be really unfair not
To have workers comp. hot rhetoric.
                                                                                                                 24

Rationale: Not waste resources, efficiency
    2. Different from workers’ comp:
            a. Abolishes tort for claims below a specified threshold (loss/level of injury)
                      i. No fault requires for recovery
                     ii. Only economic loss recoverable
                    iii. Lesser injuries are in this bracket
            b. Preserves tort for claims above cut-off (negligence)
                      i. Pain and suffering recoverable
                     ii. Greater injuries are in this bracket
            c. Whereas workers’ comp abolishes all tort against employer
            d. Workers’ comp rhetoric more passionate – fairness requirement stronger (internalization,
                insurance, and spreading)
            e. Workers’ comp more widely accepted in states; only a few have auto no-fault
    3. Problems with fault liability (tort and liability insurance)
            a. Small payout for amount spent on insurance; lots went to overhead and administration costs
            b. Defendants often unable to pay damages  lots of unsatisfied judgment
            c. Undercompensation of serious injuries (usually settle out of court for less than economic
                component), overcompensation of small claims (often includes pain and suffering)
            d. Inadequacy of compensation:
                         o Contributory fault of P barred recovery
                         o Other party had no insurance or inadequate insurance
            e. Long delays for serious injuries
            f. No recovery for single-vehicle accidents
            g. Some victims left paupers
            h. Negligence taxes harm (the unlucky drivers who cause accident), not risk that all drivers throw out
            i. Often hard to determine fault in complex traffic accidents
            j. Deterrence objective not met: compensation for bad driving is paid by insurance company, not
                driver; higher premiums isn’t really a deterrent; other personal influences are more deterrent than
                tort liability
    4. Requirements of effective auto accident compensation system
            a. Compensate all injured victims for basic economic loss
            b. Maximize return on premium dollars
    5. Rationale for auto no-fault
            a. Can still maintain insurance merit rating system in no-fault. Person with excellent other coverages
                can elect to have a deductible and pay a lower premium
            b. Cheaper to just get nofault insurance for below the threshold and liability insurance for above the
                threshold
            c. Victims more likely to get compensated (1st party los insurance)
            d. Reduces costs
                      i. via reduced compensation for noneconomic losses below threshold
                     ii. via not having to adjudicate negligence, comparative negligence, and pain and suffering (3
                         big fact questions)
                    iii. but added cost of compensating those who wouldn’t recover under fault system
Remember: there is the added cost, more people get to recover
            e. Reduce transaction costs
            f. Aligns compensation with economic loss
            g. Speeds up compensation
    6. Criticisms of No-fault
            a. Fault advocate: deterrent effect on bad driving lost; good driving victim recovers from her own
                insurance  no pressure on bad driver; is a shift from 3rd party to 1st party insurance
                      i. Counter:
                               1. little deterrence in fault system anyway
                               2. hard to actually determine fault/innocence
                               3. other deterrent pressures – self-interest, concern for fam, criminal sanctions
                                                                                                                   25

                             4. negligence/fault is a liability insurance system, so insurance company pays, not
                                  the actor; the cost pressure is just the premium
                             5. potential actors and victims are the same; can keep merit rating system – no-fault
                                  only describes how payment goes, not how premiums calculated
           b. Choice advocate: no free choice in compulsory plans. For car-car crashes, why not allow driver to
                choose whether to protect self.
                      i. Counter:
                             1. people have social responsibility
                             2. 3rd party effect – emergency room costs
                             3. viability of insurance pool affected if you opt out (?)
                             4. driving is a collective activity (dependent on others for highways, etc.)
                             5. Calabresi:
                                      a. let cost of driving stay with driving.
                                      b. Market allocation: costs of driving will appear on books – if externalized
                                           to Blue Cross, don’t appear on books.
    7. Threshold
           a. Dollar amount of economic/medical damages
           b. Verbal threshold: more in balance than states with dollar amt thresholds
           c. High threshold: encourages people not to sue; are typically in fiscal balance (cost savings are
                balanced by added cost)
           d. Low threshold: not in balance
    8. 3 types:
           a. Add-on plans: add to present tort-liability insurance system; don’t abolish tort liability: the hope is
                that everyone will choose not to sue in tort
                      i. Increased benefits for medical/related expenses and new benefits for lost wages
                     ii. 3 types:
                             1. requires insurance company to offer add’l coverage to purchasers
                             2. requires add’l coverage to be included in any policy sold = mandatory add-on no-
                                  fault
                             3. must purchase coverage (add-on mandatorily included) before can drive =
                                  compulsory add-on no-fault insurance
           b. modified plans
                      i. eliminates some tort liability
                     ii. 2 types:
                             1. limits victim’s right to sue in tort for general damages – can still sue for economic
                                  loss but pain & suffering, etc. are limited; thresholds:
                                      a. threshold re amt of medical expenses incurred; if don’t incur a certain amt,
                                           can’t sue for pain and suffering
                                      b. threshold re certain injuries for which pain & suffering can be claimed
                             2. eliminate right to sue/be sued in tort for economic loss to the extent that the victim
                                  can collect no-fault benefits; can sue for economic loss beyond what is recoverable
                                  under no-fault benefits
           c. pure no-fault
                      i. seeks to eliminate negligence system for compensation
                     ii. extensive compulsory no-fault benefits
                    iii. no-fault coverage mandatory

Cheaper to get no fault and liability insurance combined than just to get liability insurance

New Zealand Scheme:
Complete abolition of tort of personal injury by accident. No attempt at the individualized pain and suffering.

3 components:
1. Workplace accidents  financed by employers (rate by industry)
                                                                                                                 26

2. Auto accidents  takeover categories of liability insurance rating and continues to use them. Used to be a
flat fee. Revised to include a tax per liter of gasoline.
3. Other accidents- accidents to non earners- paid for by government revenues (progressive income tax etc)

Justifications
     Fairness idea in workers comp
     Beneficiaries of products and services should contribute to pay for the risks that employees have making
         the goods.
     Fairness on highway. Everyone who uses the road system benefits from the roads.
     Other accidents- Necessary part of life that we all as net beneficiaries of social life should contribute to
         fund to people
    Counter:
     Utilitarian rationale would say only after we have tried and failed to come up with other attribution should
         we have this residual category at the end that gets you spreading but not deterrent pressure.

				
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