Epstein, Tort, and Sticking it to BP
posted by Nate Oman
Richard Epstein mounts a defense of tort liability in today’s WSJ. I wish that a defense of civil liability was a stronger element of free-market politics in this country, so I’m happy to see Epstein make the case for tort in a place such as the WSJ. Epstein calls for “a no-nonsense liability system that fastens full responsibility on the parties who run dangerous operations, no excuses allowed.” I am not a tort aficionado, but I wonder whether drilling for oil counts as an ultrahazardous activity exempt from the ordinary regime of negligence liability or if this is simply Epstein advancing his preference for a regime of strict liability. He goes on to write:
A tough liability system does more than provide compensation for serious harms after the fact. It also sorts out the wheat from the chaff—so that in this case companies with weak safety profiles don’t get within a mile of an oil derrick. Solid insurance underwriting is likely to do a better job in pricing risk than any program of direct government oversight.
I agree with Epstein that insurance companies coping with the risk of a tough liability regime are likely to be much better monitors than government agencies coping with the risk of political embarrassment. I do think, however, that Epstein’s article is rather too optimistic that tort can so easily serve the multiple purposes that he assigns to it. By providing victims with what amounts to a form of insurance through the tort system we create another kind of moral hazard, one that is less easy to manage through the kind of monitoring that private insurance provides because the relationship between insured and insurer in the tort regime isn’t contractual. Furthermore, as a system of compensation tort law has a tendency toward feast and famine for victims. This may mitigate concerns about moral hazard, but if we are interested in compensation for victims (as opposed to plaintiff’s lawyers) this is a problem.
There is an important aspect of tort liability that doesn’t make an appearance in Epstein’s argument. Liability does more than provide compensation and internalize costs, laudable as those goals are. As Benjamin Zipursky and John Goldberg have argued it also gives those who have been harmed a way of acting against those that have harmed them. Tort lets those who have been hurt by BP strike back, asserting themselves are more than passive objects of harm or compensation. If the proponents of civil recourse theory are to be believed — and I find myself more than a little persuaded — this is a goal worthy of attention in its own right.
Put more simply, one of the reasons we want tort law is so that those who it has hurt can stick it to BP for the harm they have suffered.