Legal Liability Research Paper

First, a legal liability may be potential, in the sense that a legally defined duty exists whose violation by the duty-holder would trigger liability, or it may be current, in the sense that the duty-holder has already violated it and the fact of violation either has been authoritatively determined or is not really in dispute.

Second, a legal liability may be criminal, civil, or administrative. It is criminal if violations are prosecuted by the government as an offense against the public and may subject violators to imprisonment or criminal fines under the special rules and procedures applying to criminal prosecutions, such as the ‘guilt beyond a reasonable doubt’ standard. It is civil if the violation is enforceable by private parties (or by the government acting in a proprietary or other analogously private capacity) seeking relief in the form of money damages, an injunction, or a declaratory judgment. It is administrative if the violation is enforceable by an administrative agency pursuant to a regulatory statute.

Third, legal liabilities may be distinguished ac-cording to the substantive law that prescribes the duty in question. This distinction is most commonly applied in connection with civil liability, where the duty may be a creature of tort law, contract law, fiduciary law, property law, inheritance law, family law, and so forth.

Fourth, the process by which liability is determined differs significantly between common law and civil law systems (Damaska 1986). This research paper focuses on a common law system, that of the USA, but notes several points on which the civil law systems adopt a different approach.

The discussion here is confined to general tort liability. At its most general and schematic level, the system for imposing tort liability (‘tort system’) consists of six elements: goals; substantive rules; procedural rules; remedies; choice of law; and institutions. A seventh element, which defines by exclusion, consists of enclaves in which tort law has been limited or eliminated.

1. Goals Of Tort Law

Considerable controversy exists over the goals that tort law should serve and how those goals should be weighted (Calabresi 1970). According to most tort law scholars, the dominant—and for some, the only— legitimate purpose of tort law was traditionally thought to be ‘corrective justice.’ This is an Aristotelian notion defining justice as the restoration of the status quo ante by repairing wrongfully inflicted losses and annulling wrongfully obtained gains. Some scholars see corrective justice as requiring a system of tort law that enforces a direct, moral relationship between the victim and the injurer, obliging the latter to compensate the former for the injury that he or she has wrongfully inflicted. The purpose of compensation, in this view, is simply to affirm this moral relationship and to effectuate this duty of repair, correction, and restoration (Coleman 1992).

Increasingly, however, the corrective justice conception of tort law has been augmented, and to some extent supplanted, by more functional goals. They seek to enforce not a particular moral relationship between injurer and victim for its own sake, but rather a variety of social goals to which the individual parties to the tort case are merely instrumental. The most important of these social goals are (a) the deterrence of excessive risk creation, and (b) the distribution of injury losses through the compensation of victims.

The functional rationale for compensation is that it distributes the costs of accidents more broadly; at the limit (social insurance), it spreads those costs from the individual victim to all members of society, who can better bear it. But a functionalist tort law might— depending on the dictates of benefit–cost analysis, effective deterrence, administrative efficiency, insurability, and other policy criteria—require that an entity other than the injurer (e.g., private or social insurance) compensate the victim, or might deny the victim compensation altogether. In the functional view, morality is at most a policy constraint; it is not constitutive of justice in tort law. Some scholars oppose functional justifications for tort liability because they believe that judges’ use of private tort disputes to pursue broad social policy goals is institutionally illegitimate, incompetent, or both (Sugarman 1989).

2. Substantive Rules

Tort law prescribes a body of substantive legal doctrine (i.e., rules or principles) to govern behavior. In common law systems, these rules are derived largely by courts from general principles of justice, previously decided cases, policy considerations, and other sources, though statutes and regulations are becoming more important sources of liability rules. In civil law systems, statutes (or codes) are the principal sources, but considerable judicial interpretation, guided by general principles of justice, is often required.

Whatever their sources, these rules or principles define the legally enforceable duties that an individual (or other entity) owes to others, and the circumstances in which he or she may violate those duties (the ‘standard of care’). For example, tort law prescribes the legal duties that a physician owes to his or her patient and the standard of care that he or she must satisfy in order to avoid liability for injuries to the patient caused by the physician’s acts or omissions. The standard of care is usefully understood in terms of the risks of injury that the physician is permitted to create in the course of treating the patient. Ordinarily—and in the case of healthcare—tort law defines this standard of care as ‘reasonable behavior or care under all of the relevant circumstances.’ A failure to meet this standard of care is called ‘negligence’ or ‘fault’ (or, in the specific case of medical treatment, ‘medical malpractice’) (Prosser and Keeton 1984).

For certain types of activities, such as the use of explosives or the sale of defective products, the standard of care is not negligence but ‘strict liability.’ If an Activity is subject to a strict liability standard, the actor who causes an injury to another person is liable for that injury even if he or she was exercising reasonable care (i.e., was not negligent). In common law countries such as the USA, negligence is the default standard of care and strict liability the exception. Indeed, even strict liability rules usually incorporate fault-type balancing considerations that make the liability less strict than it might appear on its face.

In addition to negligence and strict liability, there is a third liability standard: intentional infliction of harm. Although courts have defined ‘intention’ in a number of different ways, it is not limited to harming another with malice, ill-will, or an affirmative desire to injure, but also includes a risky action undertaken with the knowledge (or in some cases, reason to know) that it is likely to injure another. A fourth liability standard, no liability, is discussed in Sect. 7.1 under ‘immunities.’

In order to establish a defendant’s tort liability, the plaintiff must prove that the defendant owed him or her a legal duty of care, that the defendant breached this duty by violating the applicable legal standard (usually negligence), and that the defendant’s breach of duty caused harm to the plaintiff of a kind that tort law recognizes as compensable.

Even if the plaintiff is able to establish duty, breach, causation, and damage, however, tort principles may provide the defendant with a defense. If the defendant can prove that a particular defense applies, the defense is usually a ‘complete’ one barring any liability. Examples include assumption of the risk (i.e., the plaintiff knowingly and voluntarily consented to the risk), statute of limitations (i.e., the plaintiff did not bring suit within the requisite period of years), and immunity (i.e., the law bars liability for certain categories of actors). The plaintiff’s own negligence (‘contributory negligence’) traditionally was a complete defense, but this rule has been replaced by various versions of ‘comparative negligence (or fault)’ under which the plaintiff’s negligence does not bar his or her recovery completely but instead reduces it according to the parties’ relative fault (Prosser and Keeton 1984).

3. Procedural Rules

Procedural rules specify how claims must be presented to the court, which party bears the burden of producing evidence in the first instance, which party bears the burden of persuading the trier of fact ( judge or jury), and which standard of proof must be satisfied (usually ‘a preponderance of the evidence’, also described as ‘more likely than not’). These rules also prescribe how jurisdiction over a party must be obtained, what kinds of notice must be provided, how discovery (i.e., disclosure of information possessed by a party or witness) is conducted, how other parties may be brought into the lawsuit, the powers that judges may lawfully exercise, how parties should conduct motion practice (i.e., the rules governing requests for judicial orders), how decisions may be appealed, and the like. Another set of quasi-procedural rules govern the admissibility of evidence, although such rules are much fewer in civil law systems where there is no need to insulate lay jurors from inadmissible evidence, thus making for much quicker and less costly and cumbersome trials (American Law Institute 2000).

4. Remedies

Once a defendant’s tort liability is established, essentially two kinds of remedies (i.e., forms of relief) may be available. The most common remedy by far is money damages, which in turn can be subdivided into compensatory and punitive damages. Compensatory damages are designed to restore the plaintiff to the status quo ante insofar as money can do so. Nevertheless, under the so-called ‘American rule,’ each party bears its own counsel fees and costs unless a statute specifically provides for fee-shifting. The ‘English rule,’ which requires the losing party to defray some or all of the prevailing party’s fees, is also more common in civil law countries. In those countries, however, counsel fees tend to be much lower because much of the investigatory work done by lawyers in the USA is instead done by magistrates, and also because civil law proceedings tend to be far less complex and protracted.

In the USA, compensatory damages may cover physical injuries, lost wages, medical expenses, other out-of-pocket costs, loss of profit opportunity, emotional distress, pain-and-suffering, hedonic loss, damage to intimate relationships (‘consortium’), reputational loss, loss of privacy, and so forth. Punitive damages may be assessed against a defendant whose tortious conduct was particularly egregious and socially abhorrent. Tort reform statutes in many states, however, now impose a variety of limits on punitive damages (Blatt et al. 1991).

Tort law ordinarily applies to relatively sudden, unintentional, and isolated events, so the only meaningful relief is post-accident money damages. In cases where the wrongful conduct is of a continuing nature, however, injunctive relief—a judicial order requiring the defendant to act, or refrain from acting, in a particular way, on pain of being held in contempt and other sanctions—may be available. This occurs most commonly in ‘nuisance’ actions against polluters or others whose conduct interferes with a plaintiff’s use and enjoyment of her own property (Prosser and Keeton 1984).

5. Choice Of Law

In the USA, tort liability is largely adjudicated by state judges applying state law to disputes. State tort law mainly takes the form of common law principles, although an increasing number of statutes or regulations affect tort adjudication. Judges in the forum state (i.e., where the suit is filed) ordinarily apply the forum state’s own procedural, substantive, and remedial law to the dispute. If, however, the accident and wrongful conduct occurred in another state, the judge consults the forum state’s ‘choice of law’ rules in order to determine which state’s law governs which issues in inter-state disputes of this kind. These choice of law rules may dictate that the judge apply the law of the other state (lex delicti) rather than the forum state’s law (lex fori) to some or all of the issues in the case.

Many American tort cases are filed in federal rather than state court. This may be because they are ‘diversity’ cases (i.e., the plaintiff and defendant are from different states), which the US constitution permits federal courts to hear. Even in diversity cases, however, the federal court is required to apply the state tort and choice-of-law principles of the state in which it sits, while it must follow federal procedural rules. A plaintiff may also file tort cases in federal court if the claim arises under federal law—a federal statute, federal agency regulation, a limited body of federal common law, or (very occasionally) the US Constitution.

A number of federal statutes create ‘federal causes of action’ (i.e., rights to seek tort-like relief under federal law). For example, the Federal Tort Claims Act creates a federal court remedy for wrongs committed by federal officials. (Even this remedy, however, is ultimately based on state tort law; the plaintiff must show that the official’s wrong would be a tort under the law of the state where the injury occurred.) A federal civil rights statute known as Section 1983 creates a remedy, in either state or federal court, for violations of federal law committed by state or local governments. The Consumer Product Safety Act creates a federal remedy for people injured by products that violate regulations issued by a federal product safety agency.

6. Institutions

Tort law develops and operates in a distinctive institutional context. Two of the most important of these institutions are the jury (in the USA) and insurance.

Tort litigants in the USA generally have a right to a jury trial under the federal and most state constitutions, although they may waive this right and opt for a bench trial (i.e., by the judge alone). In principle, the jury is the trier-of-fact, applying the law that the judge gives it to the factual evidence presented in the case. Because of the open-ended nature of many tort law standards (e.g., ‘reasonable care’), however, jurors inevitably enjoy some leeway or discretion that enables them to introduce into jury decisions their own values and attitudes toward the parties and the law. The subjectivity and discretion of juries, together with other factors that may be closely related to the jury system (e.g., lawyers’ rhetorical skills), produce greater legal uncertainty in the USA than in other countries’ liability systems. Juries also increase the cost and duration of trials and often make settlements more difficult to reach (Litan 1993).

Juries usually render only a ‘general’ verdict (i.e., ‘we find for defendant’ or ‘we find for plaintiff in the amount of $X’); they neither state their reasons nor make explicit findings of fact. Accordingly, their verdicts—unlike the judge’s rulings on points of law—carry little or no precedential value and convey little or no information, other than the verdict itself. (In a particularly complex case, the judge may ask them to render a ‘special’ verdict with specific findings of fact in response to factual questions that the judge has put to them.) Juries are selected through a lawyer- orchestrated process (‘voir dire’) that tends as a practical matter to produce many jurors who are relatively ignorant and unsophisticated about the kinds of technical issues increasingly arising in tort cases. Much of the unwieldy and costly apparatus of the trial, including many of the rules of procedure and of evidence, are necessary only because of the risk that juries will be improperly influenced by the trial lawyers on both sides. Proceedings in Britain and in Commonwealth countries are simpler, faster, and more predictable than those in the USA because those countries have largely abolished the lay jury in civil cases (Kagan 2001).

Tort liability in all countries is profoundly shaped by the existence of insurance (Abraham 1995). Many if not most of the risks of injury that tort law regulates are insurable, in the sense that third parties (i.e., insurers) would be willing to bear those risks ex ante in exchange for some premium. Many of these insurable risks are in fact insured, either on a first-party or third-party basis. In first-party insurance, a person who is subject to a risk of injury purchases insurance to cover some or all of that risk, as when one buys a health insurance policy. First-party coverage is usually on a no-fault basis; the insurer indemnifies the insured merely on the occurrence of the insured event, without regard to how it occurred (except in the case of the insured’s misconduct). In third-party or ‘liability’ insurance, a person who fears that he or she may injure others purchases insurance to cover some or all of that liability risk, as when a driver buys an auto accident liability policy. Here, the insurer only pays if the insured has incurred a legal liability to compensate a third party.

The tort system, at least with respect to accidents between strangers (i.e., those who have not contracted over who will bear this risk), is in effect a system of mandatory third-party insurance. It is mandatory because even one who agrees to opt out of the tort system often cannot do so. This is especially true in the area of healthcare, where courts usually will not enforce contracts whereby a patient waives his or her right to sue the physician in tort in exchange for a lower fee or for a service that the physician would not otherwise be willing to provide. It is a third-party insurance system because the insurer is insuring a risk that its insured imposes on a third party who is a stranger to both of them. In effect, every healthcare consumer is required to purchase an insurance policy along with the physician’s services. This policy gives the patient a right to seek damages in the tort system according to the principles of medical malpractice law, in the event that the physician negligently injures him or her. The cost of this policy, which is reflected in the physician’s fee, is equal to the physician’s potential tort liability to the patient, which in turn is equal to the premium that the physician must pay for medical malpractice insurance (or put aside for self-insurance) to cover the liability risks the physician incurs by treating the patient.

This third-party insurance feature of tort law leads to important theoretical and policy debates (Priest 1987, Croley and Hanson 1995). Third-party insurance is often criticized as being both less efficient and less equitable than first-party insurance, which permits an insured to purchase the kind and amount of coverage that he or she prefers, and permits the insurer to demand the kind and amount of information it thinks it needs in order to underwrite the particular risk at a profit. In any event, judges applying an increasingly functional tort law take insurance into account, sometimes explicitly, in framing liability rules, and they often allocate the costs of accidents to the party they think is in the best position to insure against (distribute the risk of ) the particular risk that caused the plaintiff’s injury (Calabresi 1970).

7. Non-Tort Enclaves

Tort liability in the USA expanded enormously during the twentieth century, most radically and dramatically during the 1970s and 1980s, while in other countries it has been marginalized by social insurance schemes. Most American states have sought to stem this expansion by adopting so-called ‘tort reform’ statutes, which attempt in a variety of ways to limit the tort liabilities of healthcare providers, product manufacturers, governments and public officials, employers, and other categories of potential injurers. Although some legal scholars have claimed to detect some slowing, or even a reversal, of this expansion (Henderson and Eisenberg 1990), there is no question that the scope of tort liability today is still much larger than it was even as recently as the early 1960s (Schwartz 1992). This expansion is the subject of much political debate and controversy. Still, important enclaves remain in which tort principles do not apply or apply only to a limited extent. Two such enclaves are immunities and no-fault schemes.

7.1 Immunities

Traditionally, US courts declined to apply tort principles to accidents arising from certain categories of actors or relationships. Charitable institutions were generally immune from tort liability, and suits between between spouses and between parents and children were also barred. The general expansion of tort liability and the availability of liability insurance, however, have encouraged courts to narrow these particular immunities (Prosser and Keeton 1984).

Governments and their officials also traditionally enjoyed broad protection from tort liability, loosely referred to as ‘sovereign immunity.’ Like charitable and intrafamily immunities, courts and legislatures have narrowed the scope of sovereign immunity but it nevertheless remains quite broad. At the federal level, the Federal Tort Claims Act waives the sovereign immunity of the USA, but this waiver is subject to a number of exceptions and limitations—for discretionary decisions and many intentional torts, for example —that continue to protect the federal government from liability for many of its torts. The Eleventh Amendment to the US constitution also generally immunizes the states from being sued for money damages without their consent in federal court. Individual states are also generally immune from suits brought against them in their own courts, although all have waived this immunity to some degree. Sometimes, plaintiffs can circumvent federal or state sovereign immunity by suing individual officials rather than the government itself, but those officials are often able to claim an absolute or qualified (good-faith) immunity nonetheless, and a variety of other special rules limit suits against governments and/or their officials (Schuck 1983).

7.2 No-Fault Plans

Dissatisfaction with how the tort system allocates the costs of accidents has led governments to create some schemes for compensating victims of certain kinds of accidents without requiring them to prove an injurer’s wrongdoing. Workplace accidents are the most important area in which no-fault compensation has replaced the tort system, with workers compensation statutes in every state and the federal government. Nofault systems are more prominent in other developed countries, with New Zealand’s accident compensation law being the most comprehensive in the world (Franklin and Rabin 2001).

Workers’ compensation effects an important tradeoff. Under such a scheme, an injured worker’s sole remedy against his or her employer is to file a claim with the employer’s workers’ compensation insurance carrier, whose decision on the claim is then subject to appeal to an administrative board and ultimately to the courts. In order to receive an award, the injured worker need not prove the employer’s negligence but must only show that the accident occurred in the course of his or her employment. On the other hand, the award is limited to scheduled amounts for pecuniary losses (e.g., wages, medical expenses, therapy) for a specified number of weeks; the employee is barred from recovering for the intangible losses (e.g., pain and suffering, hedonic loss, emotional distress) that he or she could have sought had she sued in tort. (The worker may still be able to bring a tort action against a non-employer such as the manufacturer of the machine that caused the injury; such third-party actions in tort are very common in certain settings, especially industrial accidents.)

Many American states have also adopted no-fault compensation systems applicable to property damage and personal injuries sustained in automobile accidents (Schwartz 2000). Almost all of these statutes, however, do not really supplant the tort system; instead, they preserve the right to sue in tort once plaintiff’s losses exceed a specified threshold, which tends to be quite low. Indeed, some commentators contend that automobile no-fault schemes actually encourage tort litigation by supplying plaintiffs with some immediate no-fault payments that they can then use to finance their tort actions (Bell and O’Connell 1997). Politicians’ interest in these schemes, essentially ended in the 1970s. Few, if any, states have adopted them since then, and although the US Congress has recently considered a variant of the idea, it seems unlikely to gain the necessary political support.

Some narrowly targeted no-fault laws have been adopted. Congress, for example, has enacted no-fault compensation schemes for certain vaccine-related childhood diseases, for certain swine flu-related illnesses, and for nuclear power plant accidents, and a few states have enacted schemes relating to certain perinatal malpractice claims. In each instance, however, victims may under certain circumstances reject the statutory no-fault alternative and instead proceed to sue in the tort system (Rabin 1993).

8. Conclusion

The future of tort law in various societies is difficult to predict both because each nation’s legal system is different and because the scope of tort law is linked, perhaps inversely, to that of social insurance. Although the political impulses favoring a wider distribution of risk through social insurance are always strong, new experiments with or expansions of social insurance will be impeded by global competition, the liberalization of national economies, and tax reduction pressures. The kind of individualistic, fault-based, juried adjudication that characterizes the US tort law system, however, is one that few other societies can afford or would find congenial. In the US itself, the most recent generation of tort reform statutes, which are largely designed to limit adjudication costs and liability in the interests of corporate and professional defendants (at least in the first instance), are perhaps the best evidence of what the future holds.

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