The Cost of Delegated Control: Vicarious Liability, Secondary Liability and Mandatory Insurance

29 Pages Posted: 12 Nov 2003  

Giuseppe Dari‐Mattiacci

Amsterdam Law School; Amsterdam Business School; Tinbergen Institute

Francesco Parisi

University of Minnesota - Law School; University of Bologna

Abstract

Vicarious liability, secondary liability and mandatory insurance are three systems to attain judgment-proof or disappearing injurers' precaution through the direct control of a second party (the vicariously liable principal, the secondary liable party, or the insurer). In this way, the legal system delegates control over some injurers to private entities. Such mechanisms generate monitoring costs. In this paper, we consider who bears the cost of such monitoring and the effect thereof on the equilibrium level of precautions under different liability rules. We use these findings to explain some of the patterns in the coupling of substantive standards of liability and legal regimes of delegated control.

Keywords: vicarious liability, secondary liability, insurance, negligence

JEL Classification: K13

Suggested Citation

Dari‐Mattiacci, Giuseppe and Parisi, Francesco, The Cost of Delegated Control: Vicarious Liability, Secondary Liability and Mandatory Insurance. International Review of Law and Economics, Vol. 23, No. 4, pp. 453-475, December 2003; George Mason Law & Economics Research Paper No. 02-27. Available at SSRN: https://ssrn.com/abstract=343120 or http://dx.doi.org/10.2139/ssrn.343120

Amsterdam Business School ( email )

Roetersstraat 18
Amsterdam, 1018WB
Netherlands

Tinbergen Institute

Gustav Mahlerplein 117
Amsterdam, 1082 MS
Netherlands

Francesco Parisi

University of Minnesota - Law School ( email )

229 19th Avenue South
Minneapolis, MN 55455
United States

University of Bologna ( email )

Piazza Scaravilli 1
40126 Bologna, fc 47100
Italy

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