New Differences between Negligence and Strict Liability and Their Implications on Medical Malpractice Reform

This Article seeks to explore previously unexamined differences between the negligence and strict liability rules and thereby examine whether medical liability reform is required. The main thesis is that negligence as a basis for liability entails a unique mechanism, which is essentially different than the strict liability mechanism, and is more efficient for several reasons related to the legal function of resolving incomplete information problems that cause partial failure in the healthcare market. Among other things, the negligence mechanism (1) motivates the parties to a potential damages claim to invest in information gathering; (2) motivates doctors and medical institutions to adjust the appropriate medical procedures through time; (3) uses the market players’ professional reputation to resolve the market’s incomplete information problems; (4) introduces the courts as an additional oversight level; and, (5) assists the law in reducing costs resulting from lack of standardization. Furthermore, the negligence rule allows the law to ensure a more efficient risk distribution by allowing the law to distribute risk resulting from negligent errors separately from the risk resulting from non-negligent errors. This thesis leads to conclusions regarding various issues, such as the required medical liability reform. Inter alia, this Article argues that it is inappropriate to limit the negligence mechanism’s application by shrinking the limitation period or imposing damage caps. It also argues for creating and refining mechanisms to assist in resolving the market’s incomplete information problems. For example, general imposition of mandatory disclosure in the healthcare market, similar to that which is imposed on the securities market, including the establishment of a central authority such as the Securities and Exchange Commission (SEC) and supportive mechanisms such as those applied to regulating the securities market. 7 SHER.DOC 4/23/2007 2:07:15 PM 336 Southern California Interdisciplinary Law Journal [Vol. 16:335