Strict Liability Theory

Question 1

Forms of Strict Liability

Answer 1

• vicarious liability
• dangerous activity liability
• strict nuisance
• product liability
• workers comp
• auto no-fault

Question 2

Strict Liability - General Concept

Answer 2

• cost should be attributed to actor regardless of fault (secondary criticism w/o primary criticism)
• focuses more on background safety rather than situational safety (cheapest way to avoid accidents is usually to improve background safety)

Question 3

Strict Liability - View on Who Should Pay for Activities

Answer 3

• concept that there are lots of risk-generating activities in everyday life -> strict liability would say that it doesn’t matter whether or not the risk is reasonable, those who engage in the activity should pay either way
• if you benefit from the activity, you should also bear the burden of its characteristic risks

Question 4

Calabresi vs. Posner

Answer 4

• they share the same objective - both are trying to optimize the BPL level + induce social actors to exercise optimal level of care
• BUT Calabresi thinks strict liability is better at getting you there than negligence

Question 5

Calabresi - Costs

Answer 5

• primary costs = cost of prevention + costs when accidents occur (B’s and L’s)
• secondary costs = spreading costs (economic dislocation, aggravation of injury - costs after the fact, sort of a butterfly effect)
• tertiary costs = costs of administration and overhead

Question 6

Calabresi - Basic Argument

Answer 6

• strict liability does a better job than fault liability at minimizing costs, achieving efficient allocation of resources, and reaching optimal safety

Question 7

Calabresi’s Core Benefits of Strict Liability

Answer 7

• background safety
• market allocation
• cost spreading

Question 8

Strict Liability and Background Safety

Answer 8

• strict liability induces more background safety b/c it’s inherently more difficult to prove negligence further in the background (you would need to prove failure to do something that’s sufficiently linked to the injury AND you’d need to overcome information asymmetry between pl and def, who has built-in incentive to hide background B’s that could’ve been incurred)
• self-criticism vs. court criticism - you’re putting the enforcement of proper background safety in the hands of the party who’s better able to identify ways of improving it

Question 9

Strict Liability and Market Allocation

Answer 9

• actor will take into account the costs of reasonable and unreasonable risks when making decisions, rather than just taking into account cost of unreasonable risks (as in negligence)
• strict liability then leads to market criticism - market pressure to channel resources towards the socially efficient activity (one w/ lowest social cost)

Question 10

Market Allocation - Truck vs. Barge Example

Answer 10

• overall point: since the actor pays for reasonable risks in addition to unreasonable ones, the actor now more fully factors in the harm (has to pay for it all anyway) and will choose the activity w/ the lower societal cost
• choice between truck + barge for transport, w/ both operated w/ due care -> costs of reasonable risks may be far greater w/ truck, but negligence system provides no inducement to use the barge instead (since under negligence, actor won’t have to pay for those reasonably incurred harms)
• in strict liability, actor will have to pay for the harms either way -> gonna go w/ the activity that produces less harm even when done reasonably

Question 11

Strict Liability and Cost Spreading

Answer 11

• strict liability means large actors spread costs out to the consumers (beneficiaries of the risky activity) by raising their prices -> cost of the harm is not put on one person but instead spread across all those who benefit from the activity

Question 12

Externalization

Answer 12

• in negligence system, actor is always externalizing the costs of the activity
• strict liability avoids this

Question 13

Insurance

Answer 13

• theoretically, insurance allows for cost spreading under negligence system (victim spreading - you pool together w/ other potential victims + then you don’t have to bear the full cost)
• BUT strict liability better b/c it retains the pressure on the activity + tries to reduce primary costs (background safety + market allocation)

Question 14

Attribution Problem

Answer 14

• accidents happen at the intersection of many activities - how do we decide where the cost should be attributed to?
• Calabresi would argue focus on structural CCA - who is in the best position to avoid those costs on the grand scale + in the long run (emphasizes planning + control powers, + tends to point in direction of large actors)

Question 15

Enterprise Theory

Answer 15

• actor getting the benefits should pay