01:220:395 Lecture Notes - Lecture 17: Medical Malpractice, Vicarious Liability, Punitive Damages

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2 May 2016
March 29, 2016
April 1, 2016
Regulations vs Liability
- Administrators have the power to order potential injurers to correct a hazard
before an accident occurs
- Courts have the power to order injurers to compensate victims after an
accident occurs
Ex Ante vs Ex Post
- Regulations is “ex ante” Enforcement by administrators
- Liability is “ex post” Enforcement by the victim
- Ex ante: fines
- Ex post: liability
- Administrators acquire technical knowledge needed to evaluate the safety of
specialized industries
- Courts have difficulty acquiring specific knowledge
- Courts, therefore, use safety regulations as a standard in determining liability
- Adverse selection
- Moral hazard
- Insurance transfers risk from the insured party to the insurer
- When potential damages to the tort victims exceed the defendant’s net worth
firms may claim bankruptcy
- Firms sometimes place risky behavior policies in a subsidiary company to
avoid bankruptcy
Litigation cost
- Transaction cost evaluations affect the behavior of tort victims
- Litigation costs vs potential awards
Vicarious liability
- One person may be responsible for the torts committed by another
- Ex: parent/child, employer/employee
Punitive damages
- Damages given to the plaintiff to punish the defendant
- Behavior by the defendant that is:
- There is no rule regarding compensation of punitive damages
Medical malpractice
- 5% of total tort cases are medical malpractice
- Liability insurance transfers the cost of accidents by physicians to the insurer
Automobile insurance
- History:
o1921… 24 fatalities per 100 million vehicles
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