Do Exposure Suits Produce a 'Race to File'? An Economic Analysis of a Tort for Risk
University of Connecticut Economics Working Paper
33 Pages Posted: 1 Nov 2001
Date Written: October 2001
Conventional tort law does not allow victims of exposure to a toxic substance to seek compensation until they develop symptoms of illness. This may effectively bar recovery because at the time the illness arises, injurers may be judgment proof. One possible response is to allow a tort for risk that allows victims to seek expected damages at the time of exposure. However, critics charge that this could create a "race to file" wherein victims rush to file to ensure that they will get a share of the injurer's limited assets. We show that such a race may or may not occur in equilibrium, and when it does occur, not all victims choose to file at exposure if bankruptcy is an inevitable result. If bankruptcy is not inevitable, it is possible that a tort for risk will trigger bankruptcy, although a no-bankruptcy equilibrium always exists and Pareto-dominates the bankruptcy equilibrium. We examine the consequences of the various tort-for-risk equilibria on the compensation of victims, litigation costs, and injurer care.
Keywords: Toxic torts, exposure to a toxic substance, bankruptcy, litigation costs
JEL Classification: K13, K32, K41
Suggested Citation: Suggested Citation