Causation and Incentives to Take Care under the Negligence Rule

The Robustness Case for Proportional Liability

“…However, as Grady (1983) and Kahan (1989) point out, these results hinge on the notion that the scope of liability under the negligence rule is unrestricted; that is, a negligent injurer is liable for all harm done, including the harm that would have occurred even if the injurer had taken due care. They argue that this regime, known as negligence-based full liability or in short full liability, does not correspond to actual law since the scope of liability is legally restricted by the requirement that harm was actually caused by the injurer's negligence.…”

“…Therefore, an injurer is not liable for harm that would still have occurred even if the injurer had taken due care. Grady (1983) and Kahan (1989) showed that a negligence rule with a restricted scope of liability, referred to as a negligence-based threshold liability or in short threshold liability, is neither robust against the judgment-proof problem nor vulnerable to systematic court error.…”

“…3 If this can be established -normally a straightforward task -full damages are granted (full liability). 4 Moreover, threshold liability, as formalized by Kahan (1989), implicitly assumes that, after harm is done, courts can verify with certainty whether or not the harm was caused by the negligence of the injurer. Therefore, even if the courts want to apply the causation requirement in cases of uncertain causation they cannot do so by just applying the threshold liability rule.…”

“…See Stoll (1976, 145, 155ff) and Wagner (2004). 5 Kahan (1989) discusses the case of uncertain causation and considers an all-or-nothing rule in combination with a preponderance of the evidence standard of proof. We will not analyze such a rule since it does not achieve socially efficient behavior even if the standard of due care is set at the socially optimal care and injurers are solvent (see Kahan 1989, 440-1;Shavell 1987, Proposition 1, 52-3).…”

“…The Robustness Case for Proportional Liability Schweizer (2009) shows, proportional liability follows from extending the causation requirement analyzed by Grady (1983) and Kahan (1989) to situations of uncertain causation. 9 The main result of our paper is that proportional liability is socially preferable to other existing negligence-based rules in a setting where injurers are potentially judgment proof and courts make errors in determining the standard of due care.…”