Welfare Implications of Costly Litigation under Strict Liability

Auditor Liability Rules under Imperfect Information and Costly Litigation - The Welfare Increasing Effect of Liability Insurance

This paper examines auditor liability rules under imperfect information, costly litigation and risk averse auditors. A negligence rule fails in such a setting, because in equilibrium auditors will deviate with positive probability from any given standard. It is shown that strict liability outperforms negligence with respect to risk allocation, and the probability that a desired level of care is...

The Case Against Strict Liability

Tort Liability Litigation Costs for Commercial Claims

This article analyzes tort liability litigation costs using the Texas Department of Insurance Commercial Liability Insurance Closed Claim database for the years 1988–2004. Insurer costs to defend claims in which a suit was filed average $35,000 per claim in 2004$, which corresponds to a share of 0.18 of total expenditures. Claims with higher stakes and complexity lead to greater reliance on out...

Statistical Evidence in Products Liability Litigation

§ 30A:1 Overview § 30A:2 Litigation Context of Statistical Issues § 30A:3 Qualification of Expert Witnesses Who Give Testimony on Statistical Issues § 30A:4 Admissibility of Statistical Evidence—Rules 702 and 703 § 30A:5 Significance Probability § 30A:5.1 Definition of Significance Probability (The “p-value”) § 30A:5.2 The Transposition Fallacy § 30A:5.3 Confusion Between Significance Probabili...

How Costly Are Limited Liability Rules?

We quantify the cost of limited liability rules in a traditional model of investment financing under moral hazard and risk aversion. Under limited liability, we show that external debt and the granting of absolute priority to debtholders are key (but not the unique) ingredients of the optimal financing package. Removing liability limits makes possible a superior contract that punishes the entre...