Uncertain Litigation and Liability Insurance

Bharat Sarath

RAND Journal of Economics, 1991, vol. 22, issue 2, 218-231

Abstract: Legal penalties and liability insurance seem to have counteracting effects on the incentives of a potential injurer to take due care. However, if legal penalties are set efficiently and implemented perfectly, unrestricted access to insurance can be optimal. In contrast, if the standards of guilt assessment are uncertain, the size of the legal penalties may act as a spur to litigation. Therefore, the penalties required to maintain incentives when access to insurance is unlimited may provoke too much litigation, and as a consequence, the costs of ensuring due care may decline when insurance is restricted by mandate.

Date: 1991
References: Add references at CitEc
Citations: View citations in EconPapers (12)

Downloads: (external link)
http://links.jstor.org/sici?sici=0741-6261%2819912 ... O%3B2-8&origin=repec full text (application/pdf)
Access to full text is restricted to JSTOR subscribers. See http://www.jstor.org for details.

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:rje:randje:v:22:y:1991:i:summer:p:218-231

Ordering information: This journal article can be ordered from
https://editorialexp ... i-bin/rje_online.cgi

Access Statistics for this article

More articles in RAND Journal of Economics from The RAND Corporation
Bibliographic data for series maintained by ().