Torts, Expertise and Authority: Liability of Physicians and Managed Care Organizations

26 Pages Posted: 28 Sep 2004 Last revised: 17 Nov 2013

See all articles by Jennifer Arlen

Jennifer Arlen

New York University School of Law

W. Bentley MacLeod

Columbia University - Department of Economics; National Bureau of Economic Research (NBER); IZA Institute of Labor Economics

Abstract

The goal of this paper is to examine optimal individual and entity-level liability for negligence when expected accident costs depend both on the agent's level of expertise and the principal's level of authority. We consider these issues in the context of physician and managed care organization (MCO) liability for medical malpractice. It is shown that the standard rules for the determination of negligence and damages do not result in an efficient outcome when only physicians are held liable for their torts, but is restored if MCOs are held solely liable for the torts committed by their physicians. There is a damage rule that induces the efficient outcome when physicians are held liable for their torts, however these damages are a complex function of the details of the MCO contract.

Suggested Citation

Arlen, Jennifer and MacLeod, William Bentley, Torts, Expertise and Authority: Liability of Physicians and Managed Care Organizations. Rand Journal of Economics, Vol. 36, p. 494, 2005; USC CLEO Research Paper No. C03-13; NYU Law and Economics Research Paper No. 03-06; NYU Law School, Public Law Research Paper No. 61. Available at SSRN: https://ssrn.com/abstract=405740

Jennifer Arlen (Contact Author)

New York University School of Law ( email )

40 Washington Square South
New York, NY 10012-1099
United States

HOME PAGE: http://https://its.law.nyu.edu/facultyprofiles/profile.cfm?personID=20658

William Bentley MacLeod

Columbia University - Department of Economics ( email )

420 W. 118th Street
New York, NY 10027
United States

National Bureau of Economic Research (NBER)

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

IZA Institute of Labor Economics ( email )

P.O. Box 7240
Bonn, D-53072
Germany

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