Beyond Master-Servant: A Critique of Vicarious Liability

NYU, Law and Economics Research Paper No. 04-028; and USC Law and Economics Research Paper No. 04-28

EXPLORING TORT LAW, Stuart Madden, ed., Cambridge University Press, 2005

31 Pages Posted: 8 Dec 2004 Last revised: 9 Jun 2008

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

In order to regulate risk taking efficiently, tort liability rules governing organizations' liability for torts by their agents should ensure that organizations both want their agents to take optimal precautions and benefit from using cost-effective mechanisms to regulate agents. This chapter shows that vicarious liability, the current rule governing organizations' liability for their agents' torts, does not satisfy these objectives. By holding organizations liable for torts committed by employees, but not by independent contractors, vicarious liability discourages organizations from asserting direct control over agents, even when control is an efficient way to regulate care. Organizations governed by vicarious liability also may not attempt to induce efficient care-taking by independent contractors because organizations often do not maximize profits by inducing efficient care. Indeed, vicarious liability encourages organizations to undermine the effect of individual tort liability by hiring judgment-proof independent contractors.

Suggested Citation

Arlen, Jennifer and MacLeod, William Bentley, Beyond Master-Servant: A Critique of Vicarious Liability. NYU, Law and Economics Research Paper No. 04-028; and USC Law and Economics Research Paper No. 04-28; EXPLORING TORT LAW, Stuart Madden, ed., Cambridge University Press, 2005. Available at SSRN: https://ssrn.com/abstract=624564

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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