The Fault Principle

By Alan Hart,2014-05-12 13:30
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The Fault Principle

    The Fault Principle

    I. Systems of Liability and Relationship of Insurance

    A. No Liability Rule- would leave no compensation available and might ststencourage vigilantism. You would get 1 party insurance (insure yourself 1)

    (US doesn‟t follow this).

    B. Universal/ Social Insurance - (US has weak versions of this already) less

    incentive to recover quickly but people would probably still act carefully. C. Judicially Administered Liability Rules - are a compromise between no

    liability and universal insurance. (US follows this and this is what torts is).

    1. Absolute Liability (analogous to Strict Liab) proposed in Hammontree v.

    Jenner but rejected in favor of a negligence standard of foreseeability and

    reasonable person standard.

    2. Courts have developed a complex set of liability rules for determining

    allocation of losses reflects tension between Strict Liab. and Negligence

    Absolute Liability Good for compensation, but not so good for moral fairness or deterrence

    II. Judgement and burden of proof

    A. Reasons for single-judgement system: efficiency, closure for D, incentive for

    P to recover promptly and rehabilitate.

    III. Vicarious Liability „respondeat superior‟

    A. Employer-employee

    1. At common law, employer only liable for specific/direct commands. Now,

    employers liable when employee is acting “within the scope of


    2. “Frolic and Detour” – Two tests: subjective intent of the employee (ex.,

    sub intent of employee was pleasure ; employer not liable) OR objective

    reasonable foreseeability from employer‟s standpoint. Dominant view is

    objective reasonable foreseeability of the frolic and detour. If reasonably

    foreseeable, then employee may be held liable. (You should talk about

    both however).

    3. Justification: compensation - ability to spread cost by loss and has deep

    pockets; price reflects real cost of production including risk; deterrence -

    employer in position of control; moral fairness employer has more

    choices and employee less.

    B. Employer-Independent Contractor

    1. General assumption is that employer not vicariously liable for


    2. Exceptions: Non-Delegable Duty Duties are non-delegable when the

    activity is:

    i. Risky or unusual in nature

    ii. A danger to the public at large

    iii. Prescribed by statutory requirements

    See Maloney v. Rath (owner of car held liable for faulty brakes on car

    despite mechanic‟s negligence although she was careful in choosing).

    3. Justifications: compensation more places to access compensation;

    deterrence since activity risky, promotes activity substitution

    Historical Development of Fault Principle

    I. Evolution of writs of case and trespass at common law (classical view)

    A. Standard based on physical event which caused injury.

    B Case: indirect or consequential injury consequence. Liability is negligence

    have to show carelessness

    C. Trespass: direct consequence of an act involving direct application of force.

    (Strict Liability, Only defense is „inevitable accident‟).

     Trespass case were very limited, so case developed, but you have to show negl.,

    there were inequitites in both which were resolved in Brown v. Kendall

    II. Unification of the Fault Principle (standard of care) and burden on Plaintiff now.

    A. Brown v. Kendall court uses 4 categories:

    1. intentional v unintentional (outcome)

    2. voluntary v involuntary (ability to control action)

    3. lawful v unlawful (prohibited or permitted under statutes)

    4. necessary v unnecessary (legally mandated)

    Court determines D‟s behavior is voluntary, unintentional, lawful and

    unnecessary and D not liable. Not every unlawful act is negligent.

    B. Unify trespass and case into negligence with standard being “ordinary” care

    C. Justice Shaw was focused on encouraging business to develop and opted for a

    standard of negligence rather than S.L. to encourage economic growth. M

    says: people will act with the same degree of care regardless of liability

    standard; what will change is how one insures.

     So in the end, there is only liability when Defendant exercised less than ordinary

    care and Plaintiff exercised ordinary care (for Brown)

    The Standard of Care

    I. Reasonable v. Unreasonable conduct

    A. Adams v. Bullock court looks at the reasonableness of D‟s behavior and

    considered: foreseeability of the accident, feasibility of making changes, and

    whether franchise is lawful and determine trolley wires not negligently strung

    1. Naïve impiricism: anything that has not happened before is unforeseeable

    (not adhered to in tort law)

    2. Reasonable foreseeability: middle ground where some things are

    foreseeable. Note: Ct doesn‟t want to make business an insurer for

    anything that might go wrong, regardless of their fault.

    3. Omnicism: everything should be foreseeable (not required in tort law)

    B. In Braun v. Buffalo Gen. (det. it was foreseeable other buildings would be

    built and D failed to ever inspect electric wires whose insulation was only

    suppose to last three years)

    II. Economic Analysis of Negligence to Determine Reasonable Behavior A. U.S. v. Carroll Towing considers B,P,L and custom in determining if bargee

    should be aboard (found D liable b/c violated custom of having bargee during


    B. Judge Hand‟s Formula: Where B > PL not liable, but where B<PL are

    considered negligent (B= burden of safety, P= probability of harm, L=

    loss/injury). Calculations are made at the margin: If MB<MC you are over-

    investing - wasteful. If MB>MC you are under-investing negligent.

    C. Fundamental Assumptions w/ Economic Analysis

    1. People are rational maximizers (will try to max pleasure & avoid pain)

    2. Actors have perfect information

    3. Efficiency is sought to maximize all bnefits

    4. Cost efficiency investment in safety

    5. Methods calculate at margins, cost-internalization

    D. Effect with SL vs. Negligence.

    1. In strict liability, spend up to the equilibrium point, then invest in

    insurance above that point.

    2. Ex: At 35 mph 1/1000 chance accident cost $200,000 (PL=$200)

     At 40 mph 1/750 chance accident cost $300,000 (PL=$400)

     $200 additional accident cost for $100 benefit of seeing concert on time is negligent.

     Ex: Reduce speed to 30 mph where PL=83.33

     $116.67 savings but benefit is $100, therefore over-investment

    3. Difference between two liability systems is whether the victim is

    responsible for residual costs where adequate care was taken. E. Cost Internalization

    1. Cost of item depends on standard of liability. As price up, more producers

    willing to supply; as more expensive, fewer bought.

    2. Bottle/can prob: (cost bottle less, accident cost higher)

    Under NL=make bottle b/c cheaper and no need to internalize costs

    Under Neg= making cans you are careful and no need to internalize cost

    Under SL= must internalize accident costs so always add ins to each

    3. Rationale: worry that under Neg people will under-insure selves b/c

    underestimate cost of using, injured go undercompensated. With SL, acc

    costs included so “buy right amount” and will be compensated. This

    assumes actor is irrational or uninformed.

    4. We need liability rules, b/c if we didn‟t have them, then costs would be

    externalized instead of internalized, liab rules make us change our


    III. The “Reasonable Person” Standard

    A. General Rule: “reasonable person under the situation” – tort looks at conduct,

    not intentions (in crim, mens rea is considered); it‟s an objective standard –

    “community norm” not an average person. Critics of objective standard say it

    is unfair to hold people to standard they cannot meet (i.e. low intelligence,

    slow reflexes)

    B. Exceptions

    1. Disability:

a. Physical standard of reasonable person with same disability; Don‟t

    want to preclude physically disabled from participating in any activity

    but deter some, fair b/c physically disabled can participate, but lowers


    b. Mental no exceptions for low intelligence. Most jurisdictions won‟t

    permit exception for insanity b/c of difficulty in measuring, but might

    make exception when NO MORAL CHOICE & NO CONTROL.

    Deterrance Argument: By holding mentally insane people liable, we

    hope that will make them get help or have those people around them

    get help or take care of him. What if a mental condition mimics a

    physical disability (hysterical blindness)? No indicia. We allow

    exceptions for physical and not mental b/c of measurability and

    susceptibility to fraud.

    2. Age

    a. Youth Old Rule <7 not capable of negl/irrebutable, 7-14 no

    negl/rebuttable, 14-21 capable of negl/rebuttable. Now use

    “reasonable child of that age” standard (don‟t factor in intelligence)

    objectively and jury permitted to consider subnormal intelligence,

    experience. Arbitrary lines must be drawn 18 adult. Youth: old rule

    takes away jury‟s ability to distinguish between characteristics but

    under modern rule juries can bring in community values. Parents are

    not vicariously liable for their children except when they are negligent