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New Directions in Liability Law

By Walter Olson
Academy of Political Science 1988 ISBN: 9789999619233

About the Book

This volume attempts to explain the crisis in the American liability system, which took on dramatic dimensions in the late 1980s. Liability-insurance premiums for American business, when the insurance was available, multiplied in cost. Moreover, exclusions, exemptions, and increases in deductibles made insurance coverage less effective. The reaction in the business community was vocal, and all sides looked to the federal and state governments to deal with the crisis. The parties with an interest in the matter by no means agreed on the action to be taken. Indeed, the crisis has been explained in many ways by the various interested observers.

Some supporters of the current legal system have charged that the crisis is the result of collusive actions of the insurance industry. Their perspective is perhaps best exemplified in the action of eight state attorneys general who filed an antitrust suit in March 1988 against the leading insurance companies and trade associations in the liability-insurance business. Such critics think the crisis reflects problems within the insurance industry. They view the large increases in premiums and the simultaneous refusal to insure as the kinds of collusive behavior that the antitrust laws are meant to prohibit. Many critics of the industry also charge the insurance companies with poor management and investment strategies that have led to losses that the public is now being asked to cover.

Others have seen the problem as a part of the substantial growth that has taken place in the scope of liability under American tort law. For these critics of the system, the problem is that the widespread expansion of liability has driven up the cost of defending, settling, and paying tort claims. According to these observers, there have been too many cases of excessive jury awards, too much expansion of liability, and too much uncertainty in the exposure of American business. The liability crisis, for them, calls for fundamental changes in the way courts operate. Many of them think that the matter goes far beyond the liability-insurance crisis and adversely affects the United States's ability to compete in world markets. They have waged battles on many fronts—in legislatures, courts, and executive departments — to challenge some fundamental assumptions about the civil-justice system and to reverse the trend toward huge monetary judgments.

About the Author

Walter Olson is a senior fellow at the Cato Institute’s Center for Constitutional Studies. Prior to joining Cato, Olson was a senior fellow at the Manhattan Institute, and has been a columnist for Great Britain’s Times Online as well as Reason.