Strict liability versus negligence

Abstract

The purpose of this chapter is to compare negligence rules and strict liability rules and to examine the allocative effects resulting from the application of different liability regimes. It first discusses unilateral accidents, while the more complicated bilateral cases follow afterwards. Each section starts with a discussion of the rule of no liability before moving on to various forms of negligence and ending with various strict liability rules. At the end of each section, there is a discussion on how results change when relaxing specific assumptions. The various aspects are summarised focusing on the question of whether the outcome under a specific liability regime is efficient or not. We also discuss a few more specific topics of interest, for example, the allocative effects of various liability rules when agents enter into a contractual relationship, cases of 'joint liability', the impact of uncertain legal standards, and the interaction between liability law and insurance.

Optimal Liability Design Under Risk and Ambiguity

“…Another important result, found in Shavell (1982), is that optimal damages under Strict Liability are under-compensatory. 6 This result holds in my (smooth) uncertainty model, but it does not hold when the beliefs of the parties 4 See Shavell (2007), Schaefer and Mueller-Langer (2009), and references therein. 5 Other investigations of optimal liability design under risk aversion include Greenwood and Ingene (1978), deriving optimal risk sharing rules using a local approach, and Graff Zivin and Small (2003), dealing with bilateral accidents with side payments under CRRA utilities.…”

Assigning liability for pesticide spray drift

“…The 2009 version connotes strict liability while the 2012 version retreats to negligence. The distinction is important as there are different burdens of proof to establish liability under the two rules and because of their economic ramifications (Shavell, 1987;Cooter and Ulen, 2000;Schäfer and Schönenberger, 2000).…”

Privatising Climate Policy

“…In the UK, legislative revision might be needed, essentially to reverse the effective replacement of the law of nuisance by the law of negligence (Morris, 2008). There is a substantial literature on the issue of strict liability versus negligence (Schäfer, 2000; Schäfer and Schönenberger, 2000), which is beyond the scope of this paper to survey. The principle of strict liability and the law of nuisance focus on causality (Cordato, 2004; Hoppe, 2004; Morris, 2008) and it is precisely the question whether the human use of fossil fuels causes global warming that is at issue.…”