TortsProf Blog

Editor: Christopher J. Robinette
Southwestern Law School

Thursday, October 5, 2023

Abraham & Sharkey on Insurance and Tort Theory

Ken Abraham & Cathy Sharkey have posted to SSRN The Glaring Gap in Tort Theory.  The abstract provides:

The glaring gap in tort theory is its failure to take adequate account of liability insurance. Most of tort theory fails to recognize the central role that liability insurance plays in tort law and litigation, or mentions liability insurance only briefly, treating it as exogenous to tort law itself, as if it were merely a contingent source of outside financing, like a bank that passively guarantees a loan, rather than recognizing its active and central role. It is no exaggeration to say that liability insurance played a defining role in creating modern tort liability, and that modern tort liability would not look like at all like it looks today if liability insurance had not existed and influenced tort law’s development in the ways that it did.

This Article calls upon tort scholars of all theoretical and methodological stripes to take into account the significance of liability insurance. We first lay the groundwork by describing the role that liability insurance plays in the life cycle of a tort claim, sketching the contemporary incidence of liability insurance and commercial self-insurance. We then provide a new and extensive sample of significant judicial opinions that have made express reference to the availability (or unavailability) of liability insurance in precedent-setting, liability-expanding and liability-limiting tort cases. We further identify the ways that liability insurance historically has influenced, and continues to influence, the shape and scope of tort law, singling out important tort law doctrines that would never have existed at all in the absence of liability insurance. We argue that it is liability insurers who—paradoxically—have fueled the continuing expansion of American tort liability that began over a century ago.

We then explain how to begin filling the gap in tort theory that results from omitting consideration of liability insurance, showing how liability insurance can appropriately figure in both deontic and consequentialist theories of tort liability. Only by greater recognition and candid acknowledgment of the role played by liability insurance in tort law can tort theory provide an accurate picture of the field that it purports to describe.

Finally, we offer lessons for the courts, calling not only for more open acknowledgment of the significance of liability insurance in judicial opinions, but also for a radical change by proposing that judges explicitly consider record evidence on the availability of insurance against the form of tort liability at issue in tort cases.

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