Who Should Be Immune from Tort Liability?

Abstract

Tort law is generally considered to be an instrument that improves incentives. Tortfeasors typically balance an external cost (the expected ‘accident cost’) against an internal cost (the ‘precaution cost’), and tort liability restores the balance by internalizing the external cost. Therefore, one would expect that all potential injurers are subject to tort liability. Yet there are many who have some form of immunity from tort law, such as presidents, members of congress, judges, officials, firefighters, police officers, volunteers and charitable organizations. The goal of this paper is to develop an economic theory on such immunities.

I show that those who enjoy immunity typically balance two external costs. For instance, a safety inspector balances the expected accident costs (borne by the victims) against the precaution costs (borne by the inspected firm). Firefighters balance damage caused by water (the costs of intervention) against damage caused by fire (the costs of inaction), both of which are externalized.

I find that under these circumstances strict liability should not be used (as it leads to overprecaution), and that negligence rules should be more lenient (because too high due care levels are less likely to be corrected) and more clearly defined (because uncertainty has a much stronger chilling effect). Overall, this means that negligence regimes will usually take the form of ‘gross negligence liability’ (as is the case for firefighters) or ‘qualified’ or ‘good faith’ liability (as is the case for police officers and most other public officials for constitutional torts) because such regimes are both more lenient and more predictable. Absolute immunity for tort liability is granted only when such minimum norms are nearly impossible to define (as is the case for legislative and judicial functions).

This theory explains not only most immunities under American law, but also helps to explain why civil law judges enjoy weaker immunities than common law judges, and why custom is a defense in medical malpractice suits.

Keywords: chilling effect, sovereign immunity, medical malpractice, gross negligence, volunteer

JEL Classification: K13, K23