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Do Exposure Suits Produce a "Race to File"? An Economic Analysis of a Tort for Risk

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Author Info
Thomas J. Miceli (University of Connecticut)
Kathleen Segerson (University of Connecticut)

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Abstract

Conventional tort law does not allow exposure victims to seek compensation until they develop symptoms of illness. Because this may bar recovery if the injurer is judgment proof, some have advocated allowing victims to sue at exposure. However, critics charge that such a tort for risk would create a "race to file". We show that a race may or may not occur in equilibrium, and that when it does occur, not all victims choose to file even if bankruptcy is an inevitable result. We examine the consequences of the possible equilibria on compensation of victims, litigation costs, and injurer care.

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Paper provided by University of Connecticut, Department of Economics in its series Working papers with number 2004-25.

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Length: 36 pages
Date of creation: Jun 2004
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Handle: RePEc:uct:uconnp:2004-25

Note: We thank Patrick Gonzalez, Raymond Deneckere (editor), two referees, participants at the annual American Law and Economics Association Meetings, Harvard Univ., May 2002, the CIRANO-IDEI-LEERNA Conference on Regulation, Liability, and the Management of Major Industrial/Environmental Risks, Toulouse, France, June 2003, and colleagues at the University of Connecticut for useful comments on earlier versions of this paper.
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  1. Shavell, Steven, 1985. "Uncertainty over Causation and the Determination of Civil Liability," Journal of Law & Economics, University of Chicago Press, vol. 28(3), pages 587-609, October.
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  2. Ringleb, Al H & Wiggins, Steven N, 1990. "Liability and Large-Scale, Long-term Hazards," Journal of Political Economy, University of Chicago Press, vol. 98(3), pages 574-95, June. [Downloadable!] (restricted)
  3. Kathryn E. Spier, 2002. "Settlement with Multiple Plaintiffs: The Role of Insolvency," Journal of Law, Economics and Organization, Oxford University Press, vol. 18(2), pages 295-323, October.
  4. repec:att:wimass:19199822 is not listed on IDEAS
  5. T. Randolph Beard, 1990. "Bankruptcy and Care Choice," RAND Journal of Economics, The RAND Corporation, vol. 21(4), pages 626-634, Winter. [Downloadable!] (restricted)
  6. Shavell, S., 1986. "The judgment proof problem," International Review of Law and Economics, Elsevier, vol. 6(1), pages 45-58, June. [Downloadable!] (restricted)
  7. Rose-Ackerman, Susan, 1989. "Dikes, Dams, and Vicious Hogs: Entitlement and Efficiency in Tort Law," Journal of Legal Studies, University of Chicago Press, vol. 18(1), pages 25-50, January.
  8. Douglas W. Diamond & Philip H. Dybvig, 2000. "Bank runs, deposit insurance, and liquidity," Quarterly Review, Federal Reserve Bank of Minneapolis, issue Win, pages 14-23. [Downloadable!]
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  9. Thomas J. Miceli & Kathleen Segerson, 2004. "A Tort for Risk and Endogenous Bankruptcy," Working papers 2004-24, University of Connecticut, Department of Economics. [Downloadable!]
  10. Bruce A. Larson, 1996. "Environmental Policy Based on Strict Liability: Implications of Uncertainty and Bankruptcy," Land Economics, University of Wisconsin Press, vol. 72(1), pages 33-42. [Downloadable!] (restricted)
  11. Schwartz, Alan, 1993. "Bankruptcy Workouts and Debt Contracts," Journal of Law & Economics, University of Chicago Press, vol. 36(1), pages 595-632, April.
  12. Fischer, Michael J, 1996. "Union Carbide's Bhopal Incident: A Retrospective," Journal of Risk and Uncertainty, Springer, vol. 12(2-3), pages 257-69, May.
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