Strict liability, insurances and the need for reform (10 cap)

Question 1

what is the propose of nuisance law?

Answer 1

• to protect against unreasonable and significant interference with entitlements
• It often assesses the competing activity on the basis of the degree of interference and its impact on social welfare.

Question 2

what wrongdoing you need for product liability ?

Answer 2

Negligence

As practical matter, strict liability

Question 3

How can nuisance can be view?

Answer 3

Nuisance can be viewed in terms of spillover costs to the plaintiff from the utilization of property by the defendant (an externality)

Question 4

ultra-hazardous activity

Answer 4

acts that are so inherently dangerous that those responsible for the activity are held strictly liable for any resulting injuries

Question 5

Adverse Selection:

Answer 5

a high risk seek insurance, causing premiums to rise for everyone

• When premiums reach the point where it is inefficient for those representing a low risk to seek insurance, we are left with a large percentage of high risk individuals insured.

The likelihood of accidents and claims increases again.

Question 6

Advantages of strict liability

Answer 6

• save time and reduce the court costs of determining liability
• Parties may also be inclined to settle out of court
• Fewer trials reduce the costs of administering the tort system
• places the onus on manufacturers to develop safer products which would result in fewer accidents and hence fewer claims.

Question 7

Moral Hazard:

Answer 7

inefficient situation whereby those who have purchased insurance act carelessly because even if they are liable the insurance company pays. This increases the likelihood of accidents and tort claims.

Question 8

If our tort system is going to be efficient we should, according to Guido Calabresi

Answer 8

minimizing the sum of three types of costs:

1. Costs of precaution (secondary)
2. Costs of the tort (primary)
3. Costs of administering the tort system (tertiary)

Question 9

Tort law in relation to trespass is …

Answer 9

intended to preserve the owner’s right to exclude others from his/her property.

Question 10

least cost avoiders

Answer 10

suppliers of goods are in a better position to allocate costs across a wide segment of consumers

• manufacturers : allocate costs to consumers in the form of higher prices.

Question 11

the deep pocket argument.

Answer 11

those who are subject to strict liability are financially more capable of handling losses

Question 12

Product liability

Answer 12

a manufacturer or seller being held liable for placing a defective product into the hands of a consumer.

Question 13

Trespass :

if strict liability is applied when trespass is unintentional and the defendant has acted reasonably

Answer 13

• The argument about efficiency still applies
• the broader objective of property ownership and the positive impact it can have on social welfare will be diluted if victims are left with the burden of breach. Even when there is no harm in trespass

Question 14

Disadvantages of strict liability

Answer 14

• manufacturers may deter the provision of goods necessary for economic development.
• disincentive for plaintiffs to take efficient precautions.
• reducing the likelihood of comparative or contributory negligence. (asymetrical information and positive transacation)
• the least cost avoider and deep pocket arguments can lead to cost spreading,
• possible higher prices that affected the poor

Question 15

gross negligence (extremely unreasonable)

Answer 15

• price perpetrators pay should be higher

- Strict liability require