Misalignments in tort law.

• Author: Porat, Ariel

ARTICLE CONTENTS INTRODUCTION I. THE ALIGNMENT PRINCIPLE II. LOST INCOME A. The Misalignment B. Efficiency C. Non-Efficiency Considerations III. PROVING CAUSATION A. The Misalignment B. Efficiency C. Non-Efficiency Considerations IV. OFFSETTING RISKS A. The Misalignment B. Efficiency C. Non-Efficiency Considerations V. THE WRONGFUL RISKS LIMITATION A. The Misalignment B. Efficiency C. Non-Efficiency Considerations VI. THE INJURER'S SELF-RISK A. The Misalignment B. Efficiency C. Non-Efficiency Considerations VII. CONTENDING WITH MISALIGNMENTS CONCLUSION INTRODUCTION

In negligence law, the risks taken into account by courts when setting the standard of care are the same risks considered when imposing liability and awarding damages. I call this the "alignment principle." The subject of this Article is exceptions to the alignment principle, which I refer to as "misalignments," and which have thus far been ignored by the legal scholarship. In cases of misalignment, the risks that are accounted for in setting the standard of care are different from the risks for which liability is imposed and damages are awarded.

To illustrate the alignment principle, consider an injurer who creates a foreseeable risk of harm to his neighbor's property in the amount of lo but can reduce it to zero by taking precautions that would cost him 7. Under a rule of negligence, as interpreted by the courts, failing to take these precautions would amount to negligence since the costs of these measures are lower than the expected harm (7

Assume now that the law imposes liability on the injurer in our example for only half of the harm that materialized, despite the lack of contributory negligence on his neighbor's part. Under such an approach, a misalignment between the standard of care and the compensable harms would arise: on the one hand, the standard of care would be set according to the full expected harm of the wrongful behavior, yet on the other hand, liability would be imposed for only half of the harm done.

One goal of this Article is to expose such misalignments in tort law. A second goal is to suggest modifications to the law when the misalignment cannot be justified. The most important objective of the Article, however, is to offer a theory of how misalignments should be evaluated and contended with. Three central arguments are made. First, alignment typically ensures that potential injurers have efficient incentives to take precautions toward potential victims. Second, when there is a misalignment, it could be (but is not necessarily) a sign that the law is inefficient. Therefore, for proponents of efficiency, minimization of social costs, or more generally the promotion of social welfare as the sole goal of tort law, misalignment should ring a warning bell that the law is probably inefficient and should be modified. Third, when there is a misalignment that produces inefficient outcomes, it is not necessarily an "inadvertent mistake," so to speak. This could reflect an intentional compromise that the law has made to accommodate the conflicting rationales underlying it.

The following example and ensuing discussion illustrate misalignment in the area of damages for bodily injury:

Example 1: Poor and rich neighborhoods. John drives his car at a speed of 30 mph in a rich neighborhood. Unfortunately, he hits a pedestrian as she is crossing the street. Had John driven a bit more slowly, he would have succeeded in stopping his car in time and preventing the accident. A day later, John drives his car again at the same speed, but this time in a poor neighborhood. Once again, he hits a pedestrian. All driving conditions are exactly the same as they were in the rich neighborhood the day before; the second accident would have been avoided had John driven his car a bit more slowly. Is it possible that, under a rule of negligence, the same court would find John liable for the first accident but not for the second?

Here is why the answer to this question could be yes. When a person suffers a bodily injury on account of a wrongdoer, the amount of damages awarded to the victim by the court is significantly affected by her lost income: the higher the lost income, the larger the damages. (4) This means that under tort law, high-income victims are awarded on average far more damages than low-income victims, implying that the law ascribes a greater value to the lives and limbs of high-income victims than to those of low-income victims. Assuming quite reasonably that in the rich neighborhood most people have a higher income than the residents of the poor neighborhood, one could argue that different standards of care should be applied in the two neighborhoods. Following this line of argument, since the expected harm in the rich neighborhood is greater than in the poor neighborhood (due to the difference in level of income), John should have taken more care in the rich neighborhood than in the poor one. It is quite possible, even reasonable, that the same court would find that: (a) John failed to take due care in the rich neighborhood and therefore should be held liable to his victim; and (b) John took due care in the poor neighborhood and therefore should be exempt from all liability.

Not surprisingly I could not find a single court decision suggesting that a different standard of care applies to driving in rich and poor neighborhoods (or that a doctor would be required under negligence law to take better care of a high-income patient than a low-income patient). If a court were required to explain the application of the same standard of care in both locales, it would rightly reason that the lives and limbs of the rich and poor have identical social value and are therefore deserving of the same level of legal protection. But as convincing as such reasoning may be, I would argue that it is inconsistent with the courts' long practice of awarding higher damages to high-income victims. This practice suggests that their lives and limbs are more highly valued by the law relative to those of low-income victims. To be consistent with this practice it seems that potential injurers should take greater care toward the rich than the poor, just as they should be more careful in their interactions with high-value property.

Thus in lost-income cases a misalignment emerges: on the one hand, when courts set the standard of care they ascribe the same value to the life and limbs of high-income and low-income victims; yet on the other hand, in imposing liability they ascribe different values to those same lives and limbs. If courts want to comply with the alignment principle, they should choose to either: (a) apply different standards of care to high-income and low-income victims (contrary to what they actually do), coupled with different levels of compensation (as they actually do); or (b) apply the same standard of care to high-income and low-income victims (as they actually do), coupled with the same level of compensation (contrary to what they actually do).

Theorists who endorse non-efficiency approaches to tort law (mainly corrective justice theorists) might argue that this misalignment in lost-income cases raises no concern. The standard of care, they might assert, mandates how people should behave toward one another, and this does not and should not depend on the victims' income; compensation is and should be based on the harm done, which includes lost income. Thus under the corrective justice view, it would seem that setting the standard of care and awarding compensation are and should be independent of each other. I will argue, however, that this argument is misguided: a careful reading of the notions of corrective justice implies that the standard of care and damages should be aligned in the lost-income cases. (5)

The Article proceeds in seven parts: Part I explains the alignment principle and its traditional exceptions and rationales.

Part II elaborates on the relationship between setting the standard of care and compensating victims for bodily injury, focusing on the lost-income case illustrated in Example 1. It argues that from both efficiency and corrective justice perspectives, the misalignment cannot be justified. This Part also explores the possibility of explaining this misalignment as a compromise the law makes between efficiency and distributive justice.

While Part II analyzes misalignments where courts account for risks differently in setting the standard of care and awarding damages, Parts III through V mostly present misalignments where risks accounted for in setting the standard of care are ignored at the stage of awarding damages.

Part III deals with causation and the burden of proof in tort law, demonstrating how they could result in a misalignment. In tort suits, as in other civil suits, the plaintiff is required to prove his case by a preponderance of the evidence: for the plaintiff to win, the probability of his case against the defendant must be higher than 50%. There are cases in which the preponderance-of-the-evidence rule systematically leads to loss for plaintiffs. This is typically when causation is inherently hard to prove because of a lack of scientific knowledge. In such cases, the standard of care and compensable harms are misaligned: the standard of care is set in accordance with the expected harm of the injurers' behavior, but evidence law, through the preponderance-of-the-evidence rule, systematically exempts injurers from liability. Part III presents a few categories of cases where the misalignment is particularly acute and inefficient, and argues for allowing probabilistic recoveries in these categories of cases. This Part also suggests that corrective justice considerations could explain why so many courts apply the preponderance-of-the-evidence rule despite its inefficiency.

In Part IV, the cases of "offsetting risks" are discussed. (6) Occasionally, injurers simultaneously increase and decrease risks. In...