Title

The influence of a tort for risk on the incentive to file suit in a costly legal system

Date of Completion

January 2001

Keywords

Literature, Modern|Economics, General

Degree

Ph.D.

Abstract

Under traditional tort rules, individuals exposed to toxic substances face significant obstacles to recovery, largely because the physical injury resulting from the exposure may not emerge for many years. Some economists and legal commentators suggest redefining compensable “injury” to make tortuous risk a basis of liability and adjusting compensation according to a probabilistic measure of expected loss. This thesis examines the impact of allowing such a “tort for risk” on a victim's (plaintiff's) incentive to file suit and take care. After presenting a case study of asbestos exposure to illustrate the type of scenario my plaintiff faces, I develop a theoretical model in which an individual can choose between filing a tort for risk or a tort for illness. This victim can also choose to file suit for negligent infliction of emotional distress at the time of exposure, but doing so increases the probability that the defendant will be bankrupt by the time a tort for illness can be filed. The second model presented allows the plaintiff to either file a tort for risk only, a tort for illness only, or choose between a tort for risk and a tort for illness. In examining each of these three possible scenarios, I first consider the victim's choice of care when she cannot recover these expenditures as part of the tort recovery, then I address how her choice differs when such recovery is allowed. In both models, I examine the effect of changes in litigation costs on the victim's filing decision. I find that, in general, higher litigation costs cause the plaintiff to choose a tort for illness over a tort for risk. With regard to the care choice in the second model, I find that allowing only a tort for risk gives the victim the incentive to choose the efficient level of care. I conclude this thesis with an empirical study of the factors that contribute to whether or not courts in a jurisdiction allow recovery for negligent infliction of emotional distress without present physical injury. My analysis shows that pro-business, anti-union states are less likely to allow such recovery. ^