Tort is a civil wrong other than a breach of contract – an injury to someone’s person, reputation, or feelings or damage to real or personal property – for which a lawsuit can be brought by the injured party. The legal rules of liability for torts impact economic behavior. These rules provide the circumstances under which courts grant damages to the injured party. In the United States, courts can hold injurers liable for many different types of torts such as automobile accidents, contract fraud, trespass, medical malpractice, and injuries associated with defective products.
The tort liability system in the United States, at almost 2% of the GDP*, is the most expensive in the world. It is a pro-consumer system which makes companies responsible for any damages caused by their products and services. It forces the companies to consider the scope for damages that the company’s product(s) may cause.
The basic idea behind the tort liability system in making the injurers pay for the damages or harm they cause is that it not only compensates the victims, it also gives the injurers incentives to reduce the frequency of or prevent the injury in the future.
There are two sides to every coin. The tort liability system may improve or reduce efficiency. If the tort liability claim is optimal, it alters the behavior of the companies in a socially desirable way. If it is excessive, it can have a bad effect. It can reduce the output and deter production.
There is a small degree of risk that every product sold may cause unintended harm which may not be insured against. The tort liability ensures that companies pay due attention to the safety aspect of their products. The ability of the consumers to pursue lawsuits for damages acts as an incentive for companies to make better and safer products or can be a deterrent and affect the output and production.
For the tort liability system to work as an incentive for companies, the damages must not be random. There are many who feel that if punitive damages are essentially random, then they will not provide proper incentives and, instead, act as a tax on the companies. It is a cost with no corresponding benefit. However, not everyone agrees with this finding. Many experts feel that tort liability is largely predictable and can provide proper incentives to companies. Companies have incentives to invest in product safety research in an effort to reduce liability costs while still bringing a particular product to market.
The economic benefits of the tort liability system should not be measured in terms of the compensation or payments to the victims of the tort but the gains to society through the efforts taken by the potential injurers (companies) to design safer products.
*Editor’s note: Estimated U.S. GDP for 2007, according to the CIA’s The World Factbook, is $13.84 trillion. This puts tort litigation at $276.8 billion.
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my question that is; how is in your law when the plantif is liable in his own damages