To Regulate, Litigate, or Both
Claremont McKenna College - Robert Day School of Economics and Finance; RAND
University of Pennsylvania Law School; Erasmus School of Law; PERC - Property and Environment Research Center
March 27, 2009
U of Penn, Inst for Law & Econ Research Paper No. 09-13
Robert Day School of Economics and Finance Research Paper No. 2009-07
In the United States insurance is regulated both by state insurance commissions and class action litigation. The interaction of these two systems has not been extensively studied. We examine four different facets of the regulation litigation tradeoff. The first is to examine whether a regulator’s interest in a particular cause of action reduces the likelihood that class actions covering this cause of action will be filed in the regulator’s home state. We also examine several measures of regulatory stringency in the state to determine whether there is a substitution effect between regulatory action and litigation. We also examine whether class actions are less frequent when regulators issued an administrative decision on a particular issue previously or if there are no existing state laws on the particular issue. We examine the impact of electing judges on patterns of filing. Lastly, we examine the impact of previous litigation both in the state and the specific line of litigation.
Number of Pages in PDF File: 79
Keywords: administrative law, insurance law, law and economics, products liability, torts, litigation frequency, substitution, regulatory enforcement, original equipment manufacturer parts, regulators, complex litigation
JEL Classification: G22, K13, K23, K41
Date posted: April 9, 2009 ; Last revised: May 27, 2010
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