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Monthly Archives: October 2014

Tort Liability as Compensation

Mark Gesitfeld, Compensation as a Tort Norm, in Philosophical Foundations of the Law of Torts (John Oberdiek ed., 2014).

For more than a decade, Mark Geistfeld has been developing an original and sophisticated theory of tort. Professor Geistfeld’s work has been characterized by a remarkable and admirable confluence of four characteristics. First, the work is attentive to, and respectful of, the fundamental commitments and nuances of tort doctrine and policy. Second, Professor Geistfeld’s writings display a deep knowledge of tort history and theory. Third, the work deploys a deeply sophisticated knowledge of economics but does so in language that is intelligible to those of us who are not legal economists. Fourth, the work is sensitive and responsive to the criticisms that legal philosophers have made of the economic analysis of torts. The result is an impressively original tort theory in the making. In Compensation as a Tort Norm, published in John Oberdiek, ed., Philosophical Foundations of the Law of Torts (Oxford, 2014) Professor Geistfeld both summarizes and extends his project.

The central claim of Compensation as a Tort Norm is vividly counterintuitive. According to Professor Geistfeld, all tort law—especially that part of the law which obligates actors to avoid harming others and thus demands the avoidance of actions whose occurrence triggers the payment of compensation—is compensatory. Quoting Frederick Pollock, who was himself quoting Justinian, Professor Geistfeld begins his paper with the claim that the law of torts “has for its main purpose nothing else than the development of [the] precept ‘Thou shalt do no hurt to thy neighbor.’” Elaborating, Geistfeld quotes Percy Winfield’s restatement of this precept as the principle that “all injuries done to another person are torts, unless based on some justification recognized by law.” The natural way to read these remarks, I think, is to take them to assert that the infliction of injury is presumptively tortious. Therefore, the infliction of injury presumptively gives rise to a claim for compensation.

In equating tort with compensation Professor Geistfeld, who has a Ph.D. in economics, is rejecting the core premise of his tribe. Orthodox law and economics takes it as axiomatic that the role of tort law is to deter harms that should not be inflicted. The payment of money damages serves primarily to induce appropriate precaution by others going forward, and only secondarily to repair harm wrongly done. It is therefore important to figure out just why Geistfeld thinks Pollock and Winfield are endorsing a compensatory conception of tort. Their epigrammatic remarks are subject to interpretation. One might, for instance, read them to say that the infliction of injury brings the law of tort into play. Professor Geistfeld, I think, interprets these epigrams to embrace a compensatory conception of tort law because he reads them to say that injury demands redress. The role of tort law, then, is to compensate for injury. Presumptively, all injuries give rise to claims for compensation, though that presumption may be defeated by showing that the injury in question was justifiably inflicted.

However we interpret Pollock and Winfield, Geistfeld’s first premise is clear. Compensation as a Tort Norm starts from the presumption that injury demands redress and sets out to explain and vindicate this presumption from an economic point of view. Taking to heart philosophical critiques of economic analysis, Professor Geistfeld accepts that tort law and tort theory must start with the specification of an initial entitlement. The choice we face, he explains, is a binary one: either people are entitled to the physical integrity of their persons or they are not. If they are entitled to their physical integrity, those who would impair it must pay for the right to do so. If they are not entitled to their integrity, they must pay others to respect their integrity. The correct choice is clear: people are entitled to the physical integrity of their persons. That right to physical integrity is itself part of a larger right of personal autonomy, a right to govern one’s own life so long as one does not violate the equal rights of others. An economic conception of tort is thus grounded in a liberal political philosophy.

Translating physical integrity and personal autonomy into economic terms, Professor Geistfeld extracts two lessons. The first lesson, which is specifically indebted to Ronald Dworkin’s writing on “equality of resources,” is that people must pay “the true cost of the lives that they lead.” In economic terms, this means that they must internalize the costs of (all) the injuries they inflict. Here, the affinity with Pollock and Winfield is clear. Because people must pay the “true cost of the lives they lead,” harm to others must be compensated. The second lesson that Professor Geistfeld extracts by translating autonomy into economic terms is that the cost-benefit analysis of risks of harm must proceed by adopting a “willingness-to-accept” measure of cost-justification. The alternative “willingness-to-pay” measure must be rejected. “Willingness to accept” casts potential victims as sellers of the right to endanger their physical integrity, whereas “willingness to pay” casts potential victims as buyers of rights to protection against dangerous risk impositions. Because they are entitled to their physical integrity, those on whom risks are imposed are entitled to set the price at which they will bear risk impositions by others. To put it differently, people own their own lives if they own anything and he right to endanger their lives must therefore be purchased from them. Here, Pollock’s assertion that all harm presumptively requires compensation is translated into the proposition that all risk imposition presumptively requires compensation.

With these theoretical premises in hand, Compensation as a Tort Norm turns to the basic features of tort law. Offhand, the premise that “people must pay the true cost of the lives they lead” seems to lead directly to strict liability. For a few pages, Compensation as a Tort Norm plays with this thought, but Professor Geistfeld eventually rejects strict liability in favor of negligence. The basis of this repudiation is twofold. First, and ingeniously, the paper argues that some harms are simply not compensable. Premature death is the preeminent case in point. Because some harms are not fully compensable ex post strict liability cannot make people pay the true costs of the lives they lead. When harm is not fully compensable ex post, only ex ante compensation will do, and ex ante compensation takes the form of money spent on risk reduction.

Here, Professor Geistfeld’s rejection of orthodox law and economics is evident. Orthodox economics takes deterrence of accidental injury going forward to be the raison d’etre of tort law. By revising standard damage measures to include an appropriate award for noncompensable harms such as death, strict liability might be made to deter as effectively as negligence. For example, under strict liability damages might be fixed at the price that a normal, average, or representative plaintiff would have had to be paid to bear the risk whose imposition regrettably resulted in the plaintiff’s death. Geistfeld does not tread this path, however, and I suspect it is because he sees damages under strict liability as not really compensatory, no matter how generously they are computed. The payment of damages under strict liability does not itself compensate a plaintiff who has died; premature death is the canonical noncompensable harm. The imposition of strict liability with generous damage awards for noncompensable harm would result in the compensation of the plaintiff in a particular wrongful death lawsuit only if it leads defendants to take precautions stringent enough to compensate potential victims in advance for being subjected to risks of death. And while strict liability might conceivably induce such precaution, it would not strictly require such precaution. What it would require is that damages be paid after the fact for harm done. And those damages could not compensate after the fact for non-compensable harm. According to Professor Geistfeld, only stringent precaution ex ante can compensate for suffering noncompensable harm. Because negligence insists on risk reduction ex ante, Professor Geistfeld sees negligence, not strict liability as the path forward.

When we consider negligence liability as it exists, however, we encounter a problem. In practice, negligence liability approximates a willingness-to-pay criterion not a willingness-to-accept criterion. Actors are free to impose risks without purchasing the right to do so from their potential victims. Our system of negligence liability imposes responsibility ex post; it imposes liability for harm wrongly inflicted. It does not insist that the right to impose risk on others be purchased from them. Potential victims who do not wish to have risks imposed upon them must search potential injurers out and pay them not to impose risks. Moreover, in cases where harm is not fully compensable ex post, negligence appears to suffer from the same defect as strict liability. People can be held liable for negligently inflicting harms which cannot be fully compensated but, precisely because some harms are not compensable, people cannot be made to pay the “true cost of the lives they lead.”

One way out of this predicament is to suppose that risks which cannot be adequately redressed ex post can be compensated for by insisting that potential injurers take especially stringent precaution ex ante. Professor Geistfeld has developed at length an argument that due care requires injurers to take twice the efficient level of precaution when the lives of strangers are put at risk of non-compensable harm. Compensation as a Tort Norm briefly revisits that argument. The efficient component of this supra-efficient precautionary spending compensates ex ante for compensable harm. By appropriate discounting, the efficient level of precautionary spending for compensable injuries can be backed out of the damages awarded ex post for the infliction of such harm. By definition, however, ex ante compensation for bearing risk of compensable harm does not compensate for bearing risk of non-compensable harm. Here, Geistfeld’s solution is to insist on a supra-efficient level of precautionary spending equivalent to the efficient level, so that total spending on precaution is twice the efficient amount.

Compensation as a Tort Norm elaborates this argument by explaining that this supra-efficient precautionary spending rectifies a distributive injustice. Potential victims have a right to the integrity of their persons and that entitlement requires the use of a willingness-to-accept criterion. If injurers take merely efficient precaution, however, they act as though they own an entitlement to impose risk. By so acting, injurers appropriate to themselves the right to impose risk and thereby instantiate a willingness-to-pay criterion. To rectify this distributive injustice, potential injurers must spend twice the efficient amount on precaution. They spend the efficient level once to minimize compensable harms efficiently and a second time to buy the right to impose risk. Compensation as a Tort Norm then explains that this requirement of supra-efficient precaution only applies to accidents among strangers, and when risks are not reciprocal. When the parties are contractually related, they are free to price their lives however they see fit. When risks are reciprocal, the parties are identically situated and the choice faced by one is the choice faced by all. In these two circumstances, there is no question of risk imposition, there is only risk assumption.

Compensation as a Tort Norm thus develops a deeply meditated and original tort theory. Even so, one might think there is some work to be done. Putting to one side the question of whether contract changes everything, three concerns come to mind. First, the choice of two times the efficient level of precaution seems arbitrary. Why aren’t victims free to demand any level of compensation they like? That, after all, is how bargains in markets work. What makes a second round of spending on precaution at the efficient precaution price for compensable harm the correct purchase price for every potential victim’s entitlement to the physical integrity of his or her person? It’s difficult to see why the “two times the efficient level for compensable harm” criterion isn’t plucked from thin air.

Second, the term “compensation” is being used here in a decidedly odd way. The tort system compensates for harm—for “injuries” or “hurts” in Winfield’s and Pollock’s terms. In Professor Geistfeld’s theory risk is being compensated for, and it’s being compensated for by being eliminated. This is odd twice over. Risk imposition itself is almost never a compensable event in tort law and it’s not clear why Professor Geistfeld thinks that the mere imposition of risk violates a right to the integrity of one’s person. Harm, not risk, does damage to one’s physical integrity. Risk that does result in harm leaves those exposed to it with their physical integrity intact. And it seems odd to describe risk elimination as compensation for suffering the imposition of risk. Compensating for a risk imposition requires that the risk be imposed. If I eliminate a threat that I am posing to Professor Geistfeld’s health, there is no risk imposition left for me to compensate him for; elimination removes the circumstance that might occasion compensation. Professor Geistfeld’s argument here needs more defense and development.

Third, why do reciprocal risks define a circumstance where the distinction between persons disappears? Reciprocity of risk defines an interpersonally fair situation—everyone imposes on everyone else risks roughly equivalent in magnitude and probability1—but those who impose risk and are reciprocally exposed to it remain distinct persons with diverse ends. Geistfeld’s claim that the distinction between persons vanishes in cases of reciprocal risk imposition seems simply wrong. And if the distinction between persons persists, a fundamental asymmetry between taking risk upon oneself and imposing it on others also persists. People may be free to value their own lives however they choose but they are not free to value others’ lives in that way. They must respect others’ rights, including their rights to the physical integrity of their persons. The conditions that lead Professor Geistfeld to insist on supra-efficient precaution in the case of accidents among strangers continue to obtain.

Even if these reservations are justified, however, Professor Geistfeld’s burgeoning tort theory, extended and exemplified in Compensation as a Tort Norm, is an important, distinctive and admirable achievement. All serious tort scholars should pay it serious attention. When they do, they will find their attention richly repaid.

Cite as: Gregory Keating, Tort Liability as Compensation, JOTWELL (October 22, 2014) (reviewing Mark Gesitfeld, Compensation as a Tort Norm, in Philosophical Foundations of the Law of Torts (John Oberdiek ed., 2014)), https://torts.jotwell.com/tort-liability-as-compensation/.