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1. The U.S. Liability System: Background and Trends 1

The Changing Function of Tort Law 3

Compensation through Tort Law: Blessing or Curse? 11

Outline of the Book and Key Conclusions 14

2. Economic Aspects of Liability Rules and Liability Insurance 16

A Simple Model of Liability 16

Liability Rules 19

Liability Theory and Liability Issues 29

Final Comments 34

Appendix: Mathematical Derivations 34

3. Prices and Profits in the Liability Insurance Market 42

Overview of the Market 43

Overview of Financial Results 49

Errors in Estimating Reserves 53

Disputes about Profitability 59

Growth in Premiums and Losses 67

Causes of Underwriting Cycles 77

Premium Increases for General Liability Insurance 82

Policy Implications 89

Appendix A: Profit Measurement 91

Appendix B: Calculation of Break-Even Prices 96

4. Medical Malpractice Liability 101

Trends in Claims and Premiums 102

Costs and Benefits of the Tort System 110

Alternative Institutional Arrangements 121

Conclusion 126

5. Environmental Hazards and Liability Law 128

Origins of Environmental Liability Law 129

New Science, New Sociology, and the Legal System 131

The Diffusion of Environmental Liability 132

Legislative Initiatives 139

Linking Cause and Effect 141

Judgment without Verdict 144

Insurers Depart 146

Options 147

Conclusion 153

6. Liability for Occupational Accidents and Illnesses 155

Policy Objectives and Instruments 155

The Role of the Market 158

Direct Regulation of Risk 161

Workers' Compensation 164

Civil Liability Litigation 171

Toxic Tort Compensation Schemes 180

Conclusion 183

7. Products Liability Law and the Accident Rate 184

Trends in Products Liability Litigation and Accident Rates 187

The Economic Argument for Strict Products Liability 194

Reforming Products Liability Law 207

The Stakes in Products Liability Law 222

8. Policy Options 223

Modifying Insurance Regulation 224

Tort Reforms 227

Alternative Compensation Mechanisms 238

Conclusion 240