Document Type

Article

Publication Title

Law and Contemporary Problems

Publication Date

2014

Page Number

135

Keywords

torts, liability insurance, law and economics, risk management

Disciplines

Law | Law and Economics | Torts

Abstract

Calabresi’s theory of tort liability (1961) as a risk distribution mechanism established insurance as an objective of tort liability. Calabresi’s risk-spreading concept of tort has provided the impetus for much of the subsequent development of tort liability doctrine, including risk-utility analysis and strict liability. Calabresi’s analysis remains a powerful basis for modern tort liability. However, high transactions costs, correlated risks, catastrophic losses, mass toxic torts, shifts in liability rules over time, noneconomic damages, and punitive damages affect the functioning of tort liability as an insurance mechanism. Despite some limitations of tort liability as insurance, tort compensation serves both a compensatory and deterrence role. Tort liability retains a valuable risk-spreading function in many situations and may be superior to alternative institutional mechanisms in fostering incentives.

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