Kenneth S. Abraham and Catherine M. Sharkey’s The Glaring Gap in Tort Theory has a dramatic title. The article, which is about the unheralded and unappreciated role that liability insurance plays in tort, promises to make good on two claims—first, that the major (or a major) “missing piece” in modern tort scholarship is liability insurance, and second, once this missing piece is identified, it is impossible to ever see tort law the same way again.
It is easy to quibble with both these claims. As to the first, it is worth observing that tort theory has been taken to task by critics for other failures, which also probably are, in the eyes of those critics, “glaring” and demand urgent correction. For example, mainstream tort theory, it has been observed, like much of academic legal analysis of the common law, ignores gender and race. Others have criticized tort law for its failure to grapple with its commitment to liberal individualism and, by extension, its complicity in the lack of equity in modern society. One might even take the view that tort’s failure to provide a framework through which climate change may be addressed is a “glaring gap” that should be addressed before its failure to identify and discuss liability insurance.
It is easy to dispose of this first quibble. To start with, nowhere do Abraham & Sharkey say that they have identified the only gap (glaring or otherwise) in tort law or theory. There may be others. But more to the point, the gap they identify is specific to theories that purport to explain “tort liability as we know it today.” (P. 10.) Criticism identifying what is left out of tort law, and the theory that interprets it, is often external to the practice—the gaps in its treatment of race and gender and its failure to provide courts with tools to address economic inequality and climate change are often calls for the reform (or abandonment) of tort. By contrast, Abraham & Sharkey’s criticism is internal, filling in a missing “ingredient” (as Abraham & Sharkey put it) in a recipe for a product that is working (relatively) well and is worth preserving.
The second quibble is harder to ignore and will take up the balance of this Jot. The quibble is not with the premises underlying the article. These are, to simplify, (1) that liability insurance is pervasive in tort litigation and (2) that this fact is rarely the subject of comment by courts or scholars. As to the first premise, Abraham & Sharkey estimate that “liability insurance pays roughly 85 percent of all tort costs.” (P. 10.) There is no reason to doubt this is true, although it is worth noting that their estimate is based on the dollars spent on torts costs, not the number of tort claims brought, or resolved at trial. (In a world where 100 tort cases were filed and resolved, and only 25 of these cases involved liability insurance while 75 did not, it would be accurate to say that approximately three quarters of the tort costs were paid by liability insurance if the former group involved median defense costs of $10 million per case, and the latter group involved median defense costs of $1 million per case, although it would not be accurate to say that liability insurance was “pervasive” in the tort system.) As to the second premise, while there are some prominent exceptions—such as Fleming James and Tom Bake—let us stipulate that it is correct.
The real question is: is the gap “glaring”? At one extreme, one might say that Abraham & Sharkey’s cri de coeur is akin to Betty Friedan’s powerful insight that there was a “problem that had no name” in America in 1963 which, upon being named, framed an agenda for action: feminism. On the other extreme, one might say that all Abraham & Sharkey have done is name something that has always been in place and whose steady, regular operation requires no comment until and unless it breaks down, like the plumbing of a university. It would be an odd kind of commentary on our theories of higher education to say that they have until now failed to address the hydraulic infrastructure which is, admittedly, a pervasive and necessary feature of the university’s continued operation.
Abraham & Sharkey claim that certain facts about liability insurance entail (or are strongly correlated with) certain contingent features about current tort doctrine. (P. 10; discussing Section II.) They observe that the fact of, and the increased scale of, liability policies are connected to the judicial development of strict products liability; the elimination of various immunity doctrines (parental, spousal, charitable and governmental); and the modification of traditional premises liability rules that afforded certain protections to possessors of land.
In addition, they also claim that, but for the rise of liability insurance, certain tort doctrines which are part of the basic toolkit of first year torts would have disappeared. So, according to them, were it not for the ability of tortfeasors to spread the cost of their “bad” moral luck through insurance, the thin skull rule—which is (arguably) an ad hoc exception to the foreseeability requirement of Wagon Mound – would have been shown the door by the judiciary, instead of indulged as it is now (P. 52).
They tell similar stories about other doctrines, including: (1) holding individuals to the same standard of care for the same activity as enterprises (P. 53); (2) measuring damages without regard to degree of fault (except when punitive damages are permitted) (P.55); and (3) the American Rule for legal costs (P. 56). Note that in each of these, the net (or indirect) effect is to prevent defendants from trimming their monetary obligations under in cases where they have been the cause in fact of some loss.
The trajectory described by this history is frankly pro-plaintiff. All of the new doctrines enabled by liability insurance are net positives for plaintiffs, as are all of the old doctrines preserved because of liability insurance. This is a significant conclusion, and Abraham & Sharkey underplay it. They argue that “deontic” theories such as corrective justice and civil recourse could benefit from taking into account that “what would count as a wrong [in tort] might be different if liability insurance were not so generally available.” (P. 67.) Their point is, I think, that those theories lack a persuasive normative account of tort law’s formal commitments, and that the dynamic interaction of liability insurance’s growth the doctrinal change can provide such an account. Yet Abraham & Sharkey do not emphasize the conclusion—implied by their own analysis—that the difference is that more conduct counts as a wrong when liability insurance is generally available compared to when it is not.
Assuming, for the moment, that the foregoing interpretive claim about liability insurance and tort is correct, the obvious next question is why. Abraham & Sharkey are invested in the explanation being non-trivial, and there is some reason to think that their instinct is correct. After all, if liability insurance’s relation to what happens in courtrooms were really just like plumbing’s relation to what happens in universities, then adding volume should not change the character of the outcomes.
But it seems that it does. So it cannot simply be that providing many more dollars for lawyers and damages is all that liability insurance does; if that were the case, then even if the absolute number of cases and dollars won by plaintiffs were to increase ten-fold, there would be no distinctive swerve in the pro-plaintiff character of the doctrine
One reason why adding “volume” changes the character of the outcomes in tort law is that judges grow increasingly indifferent to the impact of defendants being held liable where they perceive that the impact will be diluted through cost-spreading, whereas they remain quite sensitive to the impact of no-liability outcomes on plaintiffs. There are various places in their analysis where Abraham & Sharkey suggest that this is the real impact of liability insurance – for example, when they discuss the impact of Justice Traynor’s famous Escola concurrence.
Their explanation for why a subjective standard of care for individuals would not have replaced the objective standard of care applied universally to individuals and enterprises alike (P. 53) trades on this idea as well. In their telling, the only reason courts feel comfortable imposing the “harsh” outcomes entailed by the objective standard of care on individuals is that, through the “ameliorating effect of liability insurance,” individual defendants will be no worse off than if they had been large enterprises (P. 54).
Abraham & Sharkey may be justified in asserting that the role of liability insurance in modern tort law is so significant that any account that fails to address it suffers from a “glaring” gap. But I do not think they have fully made their case. This is for two reasons.
First, an argument based on the indifference of courts to the impact of liability on defendants does not account for the courts’ positive treatment of plaintiffs. After all, even if courts were of the view that defendants—now that they have insurance—are not terribly worse off for being found liable, they still might not be inclined to make plaintiffs better off.
One still needs a reason to think that, as a default rule, plaintiffs should recover in these cases. Is it because all things being equal, the defendants have indeed acted culpably, and liability insurance removes any external constraint on redressing the wrong suffered by the plaintiff? Or is it because in all these cases, as Fleming James would have it, there is no party who is culpable, but shifting individual accident costs to an enterprise is the proper default rule, all things being equal? I suspect that Abraham & Sharkey are inclined towards the latter, but they do not say.
Second, taking as true the correlation they describe, there is some reason to be suspicious of the causal story. The pro-plaintiff doctrinal “wins” Abraham & Sharkey describe may have occurred in spite of, not because of, the introduction and expansion of liability insurance. Causal stories in social science are notoriously hard to prove or disprove. But here is one additional fact that Abraham & Sharkey do not mention, which, at a minimum, must be addressed.
During the last 40 years, at least, liability insurers have been at the vanguard of tort reform both in the legislatures and the courts. If one counts the U.S. Chamber of Commerce as an agent of the liability insurance industry (and I think it is fair to do so), then one must ask how it is possible for a practice to have an effect that is in fundamental tension with those who benefit from the practice. Many of the doctrinal results which Abraham & Sharkey attribute to liability insurance have been vigorously resisted, and, in the case of both products liability and damages in medical malpractice, reversed by the institutions closely associated with the corporations that provide liability insurance. This seems in tension with the causal story Abraham & Sharkey tell.
Abraham & Sharkey’s article forces the reader—regardless of her normative views about the current state of tort doctrine—to think in new way about the forces that have led us to the current status quo. If, as they argue, certain doctrinal outcomes are heavily determined (or even over-determined) by the inexorable growth of liability insurance, then any critical account of tort law has to start with insurance. As I have suggested, the story that Abraham & Sharkey tell is perhaps even more complex than they realize. In their story, the rise of insurance has benefitted plaintiffs as a class according to certain doctrinal metrics. It still may be the case that, below the surface (and behind the scenes), the insurance industry and its political allies have systematically limited the transformative potential of tort law through legislative reforms that weaken the capacity of plaintiffs, as a class, to seek redress.
