JIB in the News

[Malthus]

How does insuring the disproportionate costs or spreading them out changing anything, other than allay the moral doubts that lawyers should have about going after the deep pockets of marginally culpable parties?

It changes the whole equation. Your argument seems to be that it is unfair for JIB to pay for 80% of the damages when you feel that the risk of loss should be borne entirely by the victim(since the intentional tortfeasor is judgment proof). My response is that it makes sense to essentially spread the risk of loss among all JIB patrons via insurance built into the price of JIB's products as opposed to burdening any one particular patron with the risk of loss.

As a further point, as I noted in my other post, in an alternate universe where JIB is not liable, the risk of loss would probably be allocated among JIB patrons' health and disability insurers, or there would be some sort of alternative insurance system to cover the risk of accidents caused by others (i.e. similar to UM insurance). Or to the extent injured  parties are indigent and have no insurance, the government would cover it to a certain extent. One way or another, the risk of loss will be spread. It just so happens under the tort system, JIB is presented with the direct cost of obtaining insurance, and it spreads the risk itself. Which makes sense, because of all the parties out there, JIB is the one best placed to (1) spread cost of insurance of injuries for JIB patrons, and (2) prevent injuries from occurring on its premises.

I'd quibble with (2). In general, the ability of JiB to prevent a beat-down in its parking lot is pretty minimal. We don't have details as to why JiB got dinged this time, other than because it didn't follow its policies.

The problem with allocating so much liability to the deep pockets is:

(1) It amounts in essence to strict liability for businesses - there is always going to be *some* amount of liability attributable to *some* business in every tort, however tangental; and

(2) It is socially and economically impossible to prevent being (say) 1% liable for tangental torts;

(3) Which leads to a situation where tort liability, rather than acting as an incentive to rational action, acts more or less randomly to impact (perhaps ruin) profit-making businesses as a windfall to tort victims (and their counsel!  ) - which is a socially and economically inefficient system, to say nothing about fairness.

The problem with this outcome is exacerbated by the fact that damages awards tend to be huge in the US compared to other places - Canada has J&S, but it isn't as big an issue because awards tend to be less enormous.

[stjaba]

Seriously, I feel like I'm arguing with ambulance chasers here.  "Don't worry, it's the driver's insurance company that would pay for your whiplash.  Actually, make that whiplash and pain and suffering.  Actually, make that whiplash, pain and suffering, and PTSD."

Ironically, my job is to battle ambulance chasers in court (although also sometimes defend them, as one of my practice areas is legal malpractice defense). 

One thing I find amusing is that civil defense oriented firms (such as mine) push for legislative tort reform because that's what our clients want. Ironically, though, the riskier and more uncertain things are for our clients, the better it is for us. 

[stjaba]

Which makes sense, because of all the parties out there, JIB is the one best placed to (1) spread cost of insurance of injuries for JIB patrons, and (2) prevent injuries from occurring on its premises.

I'd quibble with (2). In general, the ability of JiB to prevent a beat-down in its parking lot is pretty minimal. We don't have details as to why JiB got dinged this time, other than because it didn't follow its policies.

In this particular instance, I'd agree that Jib couldn't do much to prevent the beatdown, probably.  However, as a general rule, I think you would agree defendants are best placed to prevent accidents. I am speculating, but I imagine 90%+ of tort cases involve car accidents, slip and fall accidents and the like, where the defendant is best placed to prevent the accident. While there may be exceptions to the general rule, in formulating the general rule it makes sense to account for what happens in the vast majority of cases.

The problem with allocating so much liability to the deep pockets is:

(1) It amounts in essence to strict liability for businesses - there is always going to be *some* amount of liability attributable to *some* business in every tort, however tangental; and

(2) It is socially and economically impossible to prevent being (say) 1% liable for tangental torts;

(3) Which leads to a situation where tort liability, rather than acting as an incentive to rational action, acts more or less randomly to impact (perhaps ruin) profit-making businesses as a windfall to tort victims (and their counsel!  ) - which is a socially and economically inefficient system, to say nothing about fairness.

I believe there are some theorists (and I agree to a certain extent) who believe that whatever the rules of liability are, the risk will always be spread out, some way or another. Obviously there will be outliers where something "unfair" occurs. Doesn't it make more sense to have the risk of an unfair occurrence on defendants who can at least spread the risk of the unfair occurrence(aka an adverse judgment), as opposed to plaintiffs who cannot?

AR kept mentioning the example of a business going into bankruptcy because of a judgment beyond its policy limits. I agree that's a bad outcome, but I think a worse outcome (and more unfair outcome) is a plaintiff being entirely uncompensated for an injury that he has no responsibility for and when other parties negligently contributed to the injury.  Maybe that's not the case in the Jib news article, but it is easy to think of examples where that would be the case.

The problem with this outcome is exacerbated by the fact that damages awards tend to be huge in the US compared to other places - Canada has J&S, but it isn't as big an issue because awards tend to be less enormous.

I agree that's an issue, but it is entirely a separate and distinct issue.

[alfred russel]

That's why 97% of civil cases settle. Also, obviously the system is imperfect, but I challenge you to come up with a system that 1) Incentives defendants to avoid accidents, 2) compensates plaintiffs for their injuries and 3) allocates risk fairly.

Clearly there needs to be a point at which a party is responsible for accidents they cause or contribute to. The question of this thread, at least to me, is the extent to which relatively tangential parties should be held liable when they are the only one with deep pockets (I don't think anyone has brought up another common but economically inefficient way of handling this problem: thinly capitalizing corporations exposed to risk).

"Fairly' is a loaded word, but I would say the current system does not meet that criteria in any event.

I used the word "self-insure" earlier rather recklessly. I did not mean that I keep $20m on hand to deal with beatings I may catch in JiB parking lots. I meant that I have a variety of insurance plans plus some savings that could cover the risk. I think that is a better system, even if for many people that system is in many cases backed by the government.

I obviously can't say for certain, but it doesn't seem likely that 5 am beatdowns at dance parties will be reduced by JiB having a more vigilant security presence. More likely the parties will just move out of the JiB parking lot and into some other parking lot / field / street. That doesn't improve public safety, and may even harm it. When you put costs on a business like this, the result is that you will get less businesses. Which could get back to why there are long lines at McDonald's at 3 am.

[alfred russel]

You are correct that it is inefficient, but by removing the threat of tort liability you remove incentives for defendants to avoid accidents. Basically in your system, defendants will be free riders, it is likely there will be more accidents since defendants will have no incentive to prevent accidents, and other insurers will have to pick up the tab. And in your alternate universe, there will still be litigation, but between the insurers and plaintiffs, as opposed to between plaintiffs and at fault parties.

To be clear I'm not talking about cases where the defendent clearly contributed to the loss.

But it is more than inefficient. It reduces the ability of a person to assume risk. An example of this is that climbing gyms tend to be more expensive in the US than in Europe. I don't know for certain why the pricing is different, but I don't think I'm going out on a limb (pun intended!) to say increased US liability is a factor. I don't think it is off the wall (pun intended again!) to think that we have less climbing walls and climbers because of this.

[stjaba]

You are correct that it is inefficient, but by removing the threat of tort liability you remove incentives for defendants to avoid accidents. Basically in your system, defendants will be free riders, it is likely there will be more accidents since defendants will have no incentive to prevent accidents, and other insurers will have to pick up the tab. And in your alternate universe, there will still be litigation, but between the insurers and plaintiffs, as opposed to between plaintiffs and at fault parties.

To be clear I'm not talking about cases where the defendent clearly contributed to the loss.

But it is more than inefficient. It reduces the ability of a person to assume risk. An example of this is that climbing gyms tend to be more expensive in the US than in Europe. I don't know for certain why the pricing is different, but I don't think I'm going out on a limb (pun intended!) to say increased US liability is a factor. I don't think it is off the wall (pun intended again!) to think that we have less climbing walls and climbers because of this.

Most countries in Europe have universal health care insurance and stronger social welfare systems. Because of that, if a climber is hurt at a climbing gym in Europe through the negligence of the gym, he doesn't need to sue the gym to be compensated for his injuries, he probably will be compensated by the government. Either way, the climber is ultimately paying for his own insurance, though higher taxes as in Europe, or through a higher gym membership price as in the US.

[Malthus]

In this particular instance, I'd agree that Jib couldn't do much to prevent the beatdown, probably.  However, as a general rule, I think you would agree defendants are best placed to prevent accidents. I am speculating, but I imagine 90%+ of tort cases involve car accidents, slip and fall accidents and the like, where the defendant is best placed to prevent the accident. While there may be exceptions to the general rule, in formulating the general rule it makes sense to account for what happens in the vast majority of cases.

The problem is endemic. It is generally going to be the case that a business cannot reasonably allocate resources to prevent being 1% liable to any potential or possible intentional tort. If it did, it would have no money to do anything else.

I believe there are some theorists (and I agree to a certain extent) who believe that whatever the rules of liability are, the risk will always be spread out, some way or another. Obviously there will be outliers where something "unfair" occurs. Doesn't it make more sense to have the risk of an unfair occurrence on defendants who can at least spread the risk of the unfair occurrence(aka an adverse judgment), as opposed to plaintiffs who cannot?

AR kept mentioning the example of a business going into bankruptcy because of a judgment beyond its policy limits. I agree that's a bad outcome, but I think a worse outcome (and more unfair outcome) is a plaintiff being entirely uncompensated for an injury that he has no responsibility for and when other parties negligently contributed to the injury.  Maybe that's not the case in the Jib news article, but it is easy to think of examples where that would be the case.

The issue isn't unfairness, it is lack of social utility. Ideally, tort liablity ought to be both "fair" (an I agree, any system is likely to be 'unfair' to someone) and create incentives for people to behave in ways that make social sense - that strike a good balance between safety on the one hand, and risk-taking and profit-making on the other.

This system seems out of wack. It creates perverse incentives. To give but one example, the potential awards are so harsh that businesses are incentivised to settle frivolous cases. This acts as a net drain of money from productive to non-productive uses.   

I agree that's an issue, but it is entirely a separate and distinct issue.

I don't agree at all that it is an entirely seperate issue. It is the size of awards that is putting the system out of wack, more than anything else. They create all sorts of perverse incentives. Ditto with the lack of sensible costs rules.

It makes no sense to look at one part of the system and say 'in theory, this creates fairness'. You gotta look to the whole thing, as it actually works. Otherwise you get the 'the operation was a complete success, but the patient died' phenom.

[crazy canuck]

1 Off-Duty Police Officer: $25/hour.

Or at least following their own internal policies, which according to the report they did not do.

The organizational mission of JIB is not security.

Perhaps, but as the operator of a business that invites the public onto its property it needs to pay at least some attention to the issue.

[alfred russel]

Most countries in Europe have universal health care insurance and stronger social welfare systems. Because of that, if a climber is hurt at a climbing gym in Europe through the negligence of the gym, he doesn't need to sue the gym to be compensated for his injuries, he will be compensated by the government. Either way, the climber is ultimately paying for his own insurance, though higher taxes as in Europe, or through a higher gym membership price as in the US.

So we have three potential systems:
-insurance provided by the government
-insurance provided by private markets
-insurance provided through the tort system

One of these is dramatically less efficient than the others.

I have actually seen the advice to climbers to save money by getting out of the gym. Think about how crazy this situation is for a cash poor novice climber. Leave the weather controlled, standardized, and supervised environment for the wilderness because there isn't a party that can be sued out there.

[crazy canuck]

The problem is endemic. It is generally going to be the case that a business cannot reasonably allocate resources to prevent being 1% liable to any potential or possible intentional tort. If it did, it would have no money to do anything else.

The problem in your example is the application of the law of tort which would create any liability for someone who had nothing to do with it (ie your 1% example).

[Malthus]

The problem is endemic. It is generally going to be the case that a business cannot reasonably allocate resources to prevent being 1% liable to any potential or possible intentional tort. If it did, it would have no money to do anything else.

The problem in your example is the application of the law of tort which would create any liability for someone who had nothing to do with it (ie your 1% example).

They had 1% to do with it.

The issue is whether they should pay 1% of the damages, or 100% of the damages, or something in between.

The problem is made more pressing if the damages are in the tens of millions of dollars.

[crazy canuck]

The problem is endemic. It is generally going to be the case that a business cannot reasonably allocate resources to prevent being 1% liable to any potential or possible intentional tort. If it did, it would have no money to do anything else.

The problem in your example is the application of the law of tort which would create any liability for someone who had nothing to do with it (ie your 1% example).

They had 1% to do with it.

The issue is whether they should pay 1% of the damages, or 100% of the damages, or something in between.

The problem is made more pressing if the damages are in the tens of millions of dollars.

You are not understanding my point.  The problem is with a law of torts that would find any liability for someone so remote as to be 1% liable.

[Malthus]

The problem is endemic. It is generally going to be the case that a business cannot reasonably allocate resources to prevent being 1% liable to any potential or possible intentional tort. If it did, it would have no money to do anything else.

The problem in your example is the application of the law of tort which would create any liability for someone who had nothing to do with it (ie your 1% example).

They had 1% to do with it.

The issue is whether they should pay 1% of the damages, or 100% of the damages, or something in between.

The problem is made more pressing if the damages are in the tens of millions of dollars.

You are not understanding my point.  The problem is with a law of torts that would find any liability for someone so remote as to be 1% liable.

So, if they were 1% at fault, they should pay 0% damages? What's the threshold, moving upwards? If they were 10% at fault, should they pay anything? 25%? 50%?

I can see dismissing claims that are clearly de minimis, but 1% of a $20 million claim is still $200K an a several basis.

[crazy canuck]

So, if they were 1% at fault, they should pay 0% damages? What's the threshold, moving upwards? If they were 10% at fault, should they pay anything? 25%? 50%?

I can see dismissing claims that are clearly de minimis, but 1% of a $20 million claim is still $200K an a several basis.

I see I am going to have to explain my meaning better.  Before a party can be found liable in negligence there has to be a number of hurdles to cross.  Duty of Care,  Foreseeability, Remoteness and Causation being the big ones.  In my view the problem is that the law has developed in such a way that these important barrier to liability have been steadily eroded so that parties who have almost nothing to do with the injury (and so there had no causal connection, or the injury was too remote, or was unforseeable) are being found liable.

The problem is not with the law regarding joint and several liability.  The problem is that parties are being found to be tortfeasors who should not have any liability at all.

[The Minsky Moment]

Like St Jaba, I spend almost all my efforts on the defendant side of these equations.
I also mostly agree with the argument he is presented, which flow from tort theory as it has developed over the last few decades.

The common law was essentially a moral doctrine, and thus tended to lead to very sharp and harsh results, both for plaintiffs and defendants.  At common law, the norm of joint and several liability could easily lead to defendants paying far more than their responsibility - the common law would say that is the price of being a bad actor.  On the other hand, at common law it used to be that any material degree of fault by a victim could negate any recovery.  For centuries, legislators and judges fumbled about with ad hoc modification to these rules trying to get to more fair results.

Then came the recently departed Ronald Coase.  Coase pointed out that in a frictionless world, an efficient result can be achieved by clear delineation of property rights and freedom to transact, regardless of how the rights are allocated.  For example, it is equally efficient to give rights to producers to pollute the air, or give rights to the air breathers to block any polluting activities.  In either case, the parties can transact ex post to reach to efficient outcome in terms of the amount of production (and pollution) that is socially optimal.  The only economic consequences are distributional (and those can be remedied by transfer payments).

Of course, Coase also noted that we don't live in a frictionless world.  There are costs, often significant, to transacting.  So how rights are allocated may matter because some social actors can more easily overcome transactional frictions. 

Over the years, the Coasian framework percolated into tort theory.  Take the example of retail business that serve the public.  There are many hazards that can occur when the public comes to a retail premises: they could be hit by a falling beam, or electrocuted by fault wiring, or harmed by a fellow patron, or served bad food - any number of things.  Who should bear responsibility for those hazards?  Two things that unites all these hazards: (1)they are likely to strike fairly randomly, (2) the chance of occurence can be affected to a significant extent by the business, but not so much by the patrons.  If one says caveat emptor and puts the onus on the patron to avoid harm, it is going to quite difficult for the patrons to transact to get to the optimal level of care with respect to all these hazards.  An individual patron cannot efficiently research every retail store he or she might interact with to determine levels of relative risk, much less transact with each one to obtain more security.

Now imagine all responsiblity is placed with the stores.  Unlike the patrons, the store operators have very good information about the riskiness of their own operations and significant ability to calibrate the level of risk.  They also can protect themselves against unexpected, semi-random bad accidents by securing insurance.  Because in the aggregate insurance of retail operations is a very big business, there is likely to be a deep and reasonably competitive insurance market.  And the premium the insurance company charges is going to be calibrated on the degree of care the business operator chooses to exercise.  In a free market, that should result in business owner selecting the optimally efficient level of care and paying the corresponding premium. 

In short it makes sense to put the responsibility on the party that is most capable of engaging in efficient transactions to allocate the level and distribution of the risk.  Which will usually be the store owner.