Tort Law -- Financial Responsibility

Tort Law -- Financial Responsibility

Apart from legislation granting a right to sue for a specific harm, personal injury law generally consists of tort law and the civil procedure for enforcing it. Most scholars agree that tort law has four purposes: (1) compensation for damages; (2) financial responsibility; (3) deterrence; and (4) avoiding self-help. This article discusses the purpose of financial responsibility.

Precautions

The second purpose of tort law is to require those who cause financial harm by tortious conduct to pay for the financial harm they have caused. Tort law encourages those with a propensity to engage in tortious conduct to not engage in tortious conduct, or if they do, to be financially responsible for their tortious conduct. In other words, tort law is a kind of financial coercion. The financial coercion against those with a propensity to engage in tortious conduct is the threat of tort liability.

The threat of tort liability encourages those with a propensity to engage in tortious conduct to take precautions to avoid tort liability. For example, if the sidewalk in front of a business is in need of repair, the threat of tort liability encourages the owner of the business to get the sidewalk in front of the business repaired. Most business owners realize that it costs them less in the long run to repair the sidewalk in front of their business than risking a customer falling on the sidewalk, being seriously injured, and suing. The cost may be greater than responding to a potential or actual lawsuit by an injured customer. If it becomes widely known that the business owner left the front sidewalk in disrepair, the business may lose the business of customers who do not want to risk a similar injury.

Preparation for Financial Responsibility

Sometimes precautions can be taken to avoid the threat of liability under tort law. The cost of taking precautions to avoid liability under tort law may exceed the risk those precautions are designed to prevent.

For example, the manufacturer of a product may know from statistical analysis that about one of every 2,000 products it manufactures will be defective and that some of those defective products will avoid detection and rejection by their quality control department. The defect can be eliminated by using a manufacturing process that is three times more expensive. Whether they admit it or not, some manufactures choose the cheaper process and risk tort liability.

If there is any chance that a manufacturer's product may be dangerous, a manufacturer might set aside money in bank accounts and other investments to be used to pay any future tort liability. Although such a policy may be viewed as cold and calculating, it is often a reality. It can be argued that it is a more ethical policy than not setting aside any money at all.

Copyright 2013 LexisNexis, a division of Reed Elsevier Inc.


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