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The Liability Century: Insurance and Tort Law from the Progressive Era to 9/11

Author(s):Abraham, Kenneth S.
Reviewer(s):Pandya, Sachin S.

Published by EH.NET (May 2009)

Kenneth S. Abraham, The Liability Century: Insurance and Tort Law from the Progressive Era to 9/11. Cambridge, MA: Harvard University Press, 2008. ix + 274 pp. $45 (hardcover), ISBN: 978- 0-674-02768-8.

Reviewed for EH.NET by Sachin S. Pandya, University of Connecticut School of Law.

How much has liability insurance influenced, or been influenced by, American tort law and litigation? In The Liability Century, Kenneth Abraham, Professor of Law at the University of Virginia, has tapped and distilled past scholarship, including some of his own, to retell the history of American tort law with insurance as a lead character. The result is, for the first time, a good place to begin historical research into American tort law and liability insurance institutions, and a storehouse of plausible explanations about how those institutions have interacted. It is also an argument that, just as liability insurers have been sensitive to tort liability, the causal arrow also often runs the other way: Insurer practice has substantially affected how potential litigants and their lawyers behave, and, at times, how and when judges and legislatures have changed American tort law.

The book consists of an introduction, eight chapters, and an index. The first chapter covers the rise and judicial acceptance of liability insurance for accidental property damage and, later, bodily injury, at the turn of twentieth century. The next six chapters sketch the development of the tort-insurance relationship in particular fields: worker accident liability and the workers? compensation system (chap. 2); automobile accident liability (chap. 3); medical malpractice (chap. 4); liability for product-related injuries and environmental damage (chap. 5); the judicial abandonment of no-duty or immunity doctrines that had restricted tort liability (chap. 6); and the 9/11 Victim Compensation Fund (chap. 7). Along the way, Abraham quickly and deftly introduces the reader to many different kinds of tort and insurance laws; shifts in juridical thought; and some core ideas in insurance economics, including moral hazard, adverse selection, the ?long-tail? problem, and the apparently cyclical nature of some kinds of liability insurance markets.

In the last chapter (chap. 8), Abraham offers three generalizations about how tort and insurance institutions have interacted. First, in deciding whether to create or expand tort liability, it has mattered to judges and legislatures whether those to be affected by the new liabilities can buy liability insurance to cover them. In turn, liability insurers have often, but not always, created new forms of coverage for those new liabilities. Second, the liability insurer has been the durable de facto third party in most accident litigation, and its presence has substantially affected litigation rates and outcomes. Third, tort and insurance have increasingly come to be conceived as performing duplicate functions. Jurists often conceive of tort law as serving the insurance function of spreading accident losses. And others have identified insurance institutions a way to deter future accidents, a classic stated goal of tort law.

Readers should pick up this book with three cautions in mind. First, since the book is largely a project of synthesis, not original empirical research, the historical sketches largely tend to mirror the strengths of the secondary literature. For example, in describing the origins of workers? compensation, Abraham benefits from excellent research by Fishback and Kantor (2000) and Witt (2004), among others. Similarly, when discussing medical malpractice liability and physician regulation, Abraham remarkably condenses into thirty-five pages the fruits of a substantial literature (see Sloan and Chepke 2008; Baker 2005) to which he has contributed (e.g. Abraham and Weiler 1994). For environmental liability insurance law in the 1980s, it helps that Abraham himself literally wrote the book on the subject (Abraham 1991). But where the secondary literature has gaps, Abraham is forced to speculate much more, including, for example, relying on his ?20 years of experience as consulting counsel in insurance coverage litigation associated with mass tort and similar cases? (p. 168, n. 43). In general, the book tends to be much better for liability insurance market developments in and after the 1970s than before, perhaps because much of the research on liability insurance markets has been motivated by the sharp price spikes and coverage reductions in the mid-1970s and mid-1980s.

Second, Abraham is best understood as arguing for the plausibility of the tort-insurance interactions he identifies, offering, in his words, ?informed hypotheses worthy of further investigation? (p. 13), and leaving it to others to test them along with rival explanations. Yet, at times, Abraham?s narrative style and sparse endnotes obscure the gap between theory and evidence. For example, Abraham writes that from the 1920s onward, the insurance industry opposed compulsory auto liability insurance statutes, for fear that insurance price and coverage regulation would follow, and this opposition caused most state legislatures to refuse to adopt such laws until and after the 1970s (pp. 73-74). But he cites no evidence of insurer political opposition, even though, as it happens, there is some evidence for this. More importantly, his causal inference is far from obvious. Plausible rival stories might emphasize the opposition of car owners through organizations such as the American Automobile Association, or the pull on state legislators of arguments that such laws would lead to less careful driving, causing more auto accidents.

Third, in a book of this extraordinary scope, omissions are inevitable, and readers will inevitably disagree over how much any particular omission matters. For example, to explain why states did or did not adopt no-fault auto insurance, is it a problem that Abraham omits the failed effort to pass federal no-fault legislation in the 1970s? This depends on whether you think it plausible that what happened in Congress substantially affected how state legislators acted. Another example: In chapter 1, Abraham argues that judicial worries about moral hazard partly explain why a market for liability insurance for personal injury accidents did not exist in America until the 1880s, by which time judicial attitudes had changed to favor liability insurance as a way to assure full compensation for accident victims. Completely missing here are legislatures and insurance regulators. In a plausible rival story, however, legislatures and insurance regulators mattered much more than courts, in part because neither liability insurer nor policyholder usually had any interest in getting a court to declare their liability insurance contracts categorically void under state common law.

These cautions aside, for a lucid century-long view of how American legal and liability insurance institutions have interacted, the book has no rival. Researchers can do no better than to start here.

References:

Kenneth S. Abraham, Environmental Liability Insurance Law: An Analysis of Toxic Tort and Hazardous Waste Insurance Coverage Issues (Englewood Cliffs, NJ: Prentice Hall, 1991).

Kenneth S. Abraham and Paul C. Weiler, ?Enterprise Medical Liability and the Evolution of the American Health Care System,? Harvard Law Review 108 (1994): 381-436.

Tom Baker, The Medical Malpractice Myth (Chicago: University of Chicago Press, 2005).

Price V. Fishback and Shawn Everett Kantor, A Prelude to the Welfare State: The Origins of Workers? Compensation (Chicago: University of Chicago Press, 2000).

Frank A. Sloan and Lindsey M. Chepke, Medical Malpractice (Cambridge: MIT Press, 2008).

John Fabian Witt, The Accidental Republic: Crippled Workingmen, Destitute Widows, and the Remaking of American Law (Cambridge: Harvard University Press, 2004).

Sachin S. Pandya is Associate Professor of Law at the University of Connecticut School of Law. He is the author of ?The First Liability Insurance Cartel in America? (forthcoming).

Subject(s):Markets and Institutions
Geographic Area(s):North America
Time Period(s):20th Century: WWII and post-WWII