Tort Law and the Inherent Limitations of Monetary Exchange: Property Rules, Liability Rules, and the Negligence Rule

Abstract

Legal scholars have extensively analyzed legal entitlements in terms of more fundamental component parts, most notably with the remedial structures entailed by property and liability rules. Contrary to the claim made by some scholars, I argue that the negligence entitlement is not fully constituted by property rules, liability rules, or any combination thereof. The entitlement that generates the negligence rule, though partially constituted by both property and liability rules, is best described as a behavioral rule that obligates duty-holders to exercise reasonable care. The breach of this primary duty creates a second-order duty to pay compensation for the proximately caused physical harms, but the payment of compensatory damages does not fully exhaust or satisfy the underlying entitlement. This component of the entitlement explains why duty-holders are subject to punitive damages and perhaps even criminal negligence liability if they choose to act unreasonably in exchange for the payment of compensatory damages. The entitlement takes this form due to the inherent inadequacy of the compensatory damages remedy, an inadequacy that is most pronounced in cases of wrongful death but applies more generally to many instances of physical harm. The article concludes by identifying the distinctive features of the negligence entitlement that must be accounted for by any normative theory seeking to adequately explain tort liability, a condition that is not satisfied by prominent interpretations of tort law, including leading accounts based on the fault principle, pluralism, allocative efficiency, and corrective justice. The underlying rationale for tort liability cannot be derived from a structural (non-normative) analysis of entitlements, but the entitlement structure of the negligence rule still has important implications for the normative theory of tort law.