The Liability Crisis; R. K. Foley, Jr.

Proper analysis requires a focus upon the critical inquiry of whether a "liability" crisis exists at all. In order to answer this basic ques tion, one must consider: (1) what conditions are individuals referring to when they fret about a liability crisis; (2) are those conditions malevo lent; (3) if so, what actions and ideas cause such events; and (4) what words and deeds will curb those causes and cure the unfortunate re sults to which the commentators apply the ru bric "liability crisis"? I. THE CONTENT OF "THE LIABILITY CRISIS" As with many complex conceptual problems, "the liability crisis" most likely conveys a great variety of different thoughts to different people. While it would serve no purpose to identify and explicate every nuance, it does ap pear appropriate to evaluate the more common concerns perturbing our neighbors who employ the phrase' 'the liability crisis." What becomes manifest is a scene not unlike the fabled blind men describing an elephant, each seizing that Mr. Foley, a partner in Schwabe, Williamson, Wyatt, Moore & Roberts, practices law in Portland, Oregon.

which is most apparent to him and ignoring the important "unseen" aspects of the creature. Several related fears coalesce to form "the liability crisis. " First, more and more personal injury lawsuits are filed each year, employing more and more bizarre theories of recovery. By sheer numbers, these actions tend to clog the court system, resulting in the costs associated with delay, distress, and despair. Second, judges and jurors award substantially higher damage verdicts in more cases, particularly in heretofore unexpected sorts of claims, than ever before. Third, producers of products and suppliers of services quit producing and sup plying as a result of the increased costs attrib uted to defending their activities, thereby less ening the array of goods and services available in the marketplace. Fourth, fewer and fewer in surance companies consent to write liability coverage in fields most affected by high damage awards. In those areas where "ca pacity" (the seller-side of the liability insur ance market) remains at all, premium costs and "self-retention" (deductible amounts which re main the responsibility of the insured) increase rapidly, and a poor claims record (even without proven fault on the part of the actor) often means complete unavailability of coverage the next term.

Thus, the common focus lights upon the province of civil law customarily termed "the law of torts." 1 Since this essay seeks to deal with the phenomenon presently receiving such ardent attention, I shall not broaden the scope of my inquiry beyond these common fences. However, it should be noted that the issues and errors considered here also permeate other fields of law2 ; the manifestations elsewhere carry an explosive charge quite equal to the current problem in personal injury law. IT. ARE THESE PROBLEMS REAL AND HARMFUL? Some deny the existence of any "liability crisis." Reflection reveals otherwise. Rela tively casual observation demonstrates the exis tence, significance, and danger arising from the four areas of concern identified above. Indeed, more careful analysis shows that these four clusters of problems penetrate to a much greater depth and cover a much greater breadth than customarily noted by most observers.

A. Increased Litigation Simple empirical sampling bears witness to a litigation explosion in the United States during the past two decades. More actions are filed each year, employing more singular and curious theories of recovery, and cluttering courtrooms in a manner virtually unknown elsewhere. Increases in population, urban growth, and complexity of society-all common reasons suggested by those who dis parage any notion of a litigation explosion fail to explain the increased litigiousness of the America of today, for the growth of legal ac tivity far outstrips any such putative reasons. If the growth of litigation could be traced to an increase of legal actions pleading only tradi tional common law theories of recovery - neg ligence, assault, breach of contract, conver sion, for example-one could draw some con clusions concerning the increased carelessness of society, or a heightened tendency to refuse to keep one's bargains. However, the past score years display a vast increase in legal pro ceedings employing the judicial system to en force new "rights" or remedies, based upon newfangled theories of recovery woven out of whole cloth by legislators, administrators, judges, and law professors.

Suddenly, the American court system has become a jousting field upon which every real or perceived slight or mishap becomes a wrong to be righted, with accountability shifted to THE LIABILITY CRISIS 13 someone other than the responsible actor, nor mally someone possessing "a deep pocket" in the parlance of judicial envy. The growth of en forceable personal "rights" cuts across most traditional boundaries of the law, and invades such fields as bodily injury, damage to reputa tion, dismissal from employment, disclosure of financial risk, refusal of credit, enforcement of common rules and mores of behavior as a pre condition to participation, to name but a few. Many now seek to employ the law to adjust all thwarted expectations, no matter how unrea sonable those expectations might have been or how unrealistic reliance might appear to the common observer. The litigation explosion clearly encumbers the judicial system: it burdens the process with too many proceedings to allow inexpensive and expeditious decision. An ancient axiom pro poses that "justice delayed is justice denied,"

for delay means higher cost, less certainty, more frustration, and increased waste. Nevertheless, if a greater judicial burden rep resented the sole unpleasant result of an in creased caseload, such a burden would consti tute a cost which ought to be borne: after all, the legitimate function of government includes the provision of a court of last resort, a peaceful method of solving otherwise insoluble disputes, thereby permitting the inhabitants to get on with their lives and creative endeavors. In fact, however, the litigation clutter con tains much greater evils. First, it represents a state-coerced recovery of verdicts and judg ments by some individuals and entities against others for "wrongs" which are not wrong and in vindication of "rights" which are not right; and the recovery, taken from the pocket of one who ought not be held accountable, produces some of the other "unseen" and unlovely re sults discussed in succeeding sections of this essay. Second, the litigation explosion creates a very real likelihood of "odd man out"; a welter of lawsuits may obscure the true victim, and a perverse fate may decree that deserving Doe may lose his meritorious claim for defamation, malpractice, emotional injury, or the like, while all around him the envious and irrespon sible Roes and Moes reap the rewards of large verdicts ultimately paid by innocents. The nat ural rules of order which govern our tidy little 14 THE FREEMAN. JANUARY 1987 universe work their own results upon those who trifle with fundamentals.

B. Extension of Liability and Increase in Damages The litigation explosion intertwines with a rapid expansion of concepts of liability and a remarkable increase in the size of damage awards. The litigation increase relates to the growth in number of legal proceedings; the ex tension of liability and increase in damages refers to the number of successful actions and the increasing amounts transferred by legal processes in vindication of "wrongs" and in recognition of "rights. " Again, some observers disparage the conten tions of liability extension and damage growth; nonetheless, the favorite explanations of in flated dollars, enhanced population, and in creased societal complexity fail to come to grips with reality. By any objective measure, the litigation explosion has produced a by product of more and higher tort damage awards than ever before. Further, the ricochet effect of expanded liability and exploding damages di recdy occasions a comparable increase in set tlement value in those many cases which never pass through the courthouse door; the court house verdict becomes the exemplar for like causes settled before trial.

What aspects of tort law bear witness to this expansion of liability and bloating of verdicts? All elements partake of this change. Traditional legal analysis of civil wrongs compels the plaintiff to plead and prove four factors as a condition to judgment: (1) a duty owed by the defendant to the plaintiff, (2) a breach or viola tion of that duty, (3) a direct and legally cogni zable causal relationship between the breach of that duty and the plaintiff's harm, and (4) damage to the injured party measured in money. The last quarter century or so has ob served a remarkable broadening of duties on the part of most defendants, a concomitant diminution of corollary duties owed by plain tiffs, a relaxation of rules of evidence relating to establishment of a necessary causal nexus, and astonishing developments in rules relating to the measure and amount of compensation. Coupled with a rapid decline in the old-fashioned common law principle requiring the judge to act as a screening tool, to weed out unmeritorious or unrecognized claims at an early and inexpensive stage of the proceedings, the attenuating changes in the four critical ele ments of tort law account for most of the ex pansion in the arena of civil wrongs. It remains to highlight a few representative changes in each of these four categories as a framework for understanding the concerns underlying this aspect of "the liability crisis."

(1) Duty. A curious dichotomy afflicts the concept of legal obligation, an aberration which ensures an ever-increasing loss-transfer cost: the duty of the putative tortfeasor or wrongdoer has broadened, while concurrently, the obliga tion of the plaintiff or victim has decreased. With nominal variation, the later common law imposed relatively few and straightforward obligations upon individuals and their entities. One could not inflict intentional injury upon another, absent a privilege to repel aggressive action; one was required to keep his solemn contractual promises; one was not permitted to defraud or deceive another and gain from such conduct; and, in the area of careless or uninten tional injury, the actor and the victim both were held to the mythical but quite workable stan dard of the hypothetical reasonable man of or dinary prudence placed in the same or similar context. This jural code decried prior restraint and preconceived notions and favored unfettered in dividual creative action. In harmony with com panion tenets of theology and moral philos ophy, of economics and political theory, it pro duced a societal framework and individual perspective largely responsible for the flow ering of greatness which caused the American Revolution and the American Experiment, and which marked the classical liberal period fol lowing 1750 in the English-speaking world.

The society which developed was marked by an open texture, resulting not only in peaceable living but also in the greatest outpouring of goods, services, and ideas in recorded history. Albert Jay Nock argued that the decline of the free society commenced with 1870, the year of his birth. One might well make a case for his point, or for any succeeding year, as the retreat from classical liberalism picks up pace. By the time of his autobiographical Memoirs of a Superfluous Man in the waning years of World War II, Nock had become a most pessi mistic social commentator; yet, one cannot deny that he would declaim even more acidly today, should he be resurrected 40 years later. While the seeds of destruction pre-existed, re view and analysis demonstrate that the entire civil fabric of order and obligation has been rent asunder in the past score or two of years. With the sexual, theological, political, and moral revolutions surrounding us, no one should be surprised to learn that the legal system and substance have undergone correla tive cataclysms.

The most noteworthy extension of duty af fects those who provide the goods, services, and ideas which fuel the march of society: em ployers, manufacturers, professionals, busi nessmen, and the like. A notion of enterprise or absolute liability, while purportedly rejected in form by some courts, actually accounts for many increased obligations. Enterprise liability holds that business should bear the' 'inevitable human costs" of harm, regardless of fault, since business occupies a favorable position from which to diffuse or spread the risk. Employer liability laws , Workers' Compen sation Acts, and industrial safety codes repre sent early legislative appendages to our juris prudence resulting from this doctrine. The em ployer bears the risk and the cost of injury, even where the employee or a fellow worker causes the harm, on the theory that the "busi ness" benefits from the enterprise and "con troIs" the acts of its employers. Scant attention is paid to the incontrovertible fact that "busi ness" survives (in a market) only as long as it serves a need perceived by its customers; that the employee "benefits" just as much, rela ti vely, from wages and benefits secured without capital investment; and, that' 'business control" seems a strange sham in the heyday of civil service, compulsory unionism, affirmative action, wage claim acts, anti-discrimination and free access laws, and statutory impedi ments to reprimand and discharge.

Current legal theory does not restrict the fable of enterprise liability to the employment arena. Indeed, the concept permeates many THE LIABILITY CRISIS 15 nooks and crannies. For example, the unspoken premise for the expansion of products liability and premises liability is precisely identical with the doctrine supporting the employer liability laws and Workers'Compensation Acts of the early twentieth century. Again, the rapid devel opment of respondeat superior (the master is responsible to third parties for the torts of his servant acting in the course and scope of his employment) rests upon the same grounds. Fur ther, the breadth of duty imposed upon profes sionals-doctors, dentists, lawyers, account ants, architects, engineers - under the rubric "malpractice liability" or professional negli gence, stems from the similar belief that the creative or productive supplier of goods, ser vices, or ideas ought to bear the cost for all manner of harm in any way seemingly related to the production or distribution of the product.

As observed earlier, the courts and legisla tures have created and scattered further "rights" and obligations across the legal spec trum: "rights" of access and accommodation, of compulsory association, of employment, of disclosure, of entitlement, of equal treatment and fairness, and others too numerous to men tion. While several of these edicts rest upon some of the same unfortunate tenets collected under the talisman "enterprise liability," an other notion pervades the area: the leveling concept of envy, the faulty egalitarian premise that mandatory codes of conduct can be con cocted and enforced in a manner to coerce all individuals to treat everyone else equally and fairly. Several factors flaw this program: First, since all human value is subjective and all human choice is moral, the codifiers face an impossible task. Second, since we prize, by lip-service, freedom of thought and associa tion, the egalitarian runs headlong into an in surmountable human barrier. Third, the perver sity which follows from toying with natural law ordains that these vain attempts will result in quite unexpected and undesirable results, some of which will be treated in sections II. C, D, hereafter.

Concomitant with the rapid and vast increase of duty upon the creators, producers, and sup pliers of society, we observe a decline in the obligation imposed upon those seeking recom16 THE FREEMAN. JANUARY 1987 pense or surcease. 3 Plaintiffs have become con sidered helpless wards of the court system, be lieved to be unable to fend for themselves, em ploy common sense, or engage in everyday decision-making. The later common law devel oped the standard defenses of contributory neg ligence (the contributing carelessness of the in jured party), assumption of the risk (the voli tional entrance by the plaintiff into dangerous activities) and the fellow servant doctrine (the employer is not liable to employee A for negli gent injuries caused by employee B). One by one, these barriers have crumbled, leaving in their wake an attenuated defense of compara tive fault (the plaintiff's verdict is reduced by the percentage of his own fault causally related to the harm). In essence, the productive defen dant is rendered legally impotent.

What has occasioned this decline in correla tive duties of the "victim"? Again, the enter prise liability principle provides solid answers: consumers, users, workers, complainants, small investors, and the like, are viewed as un able to care for themselves and as requiring se curity and protection. The successful and cre ative have inherited the obligation to assure se curity and happiness to all who come into contact with them. Individual accountability has become a dinosaur in the modem age. (2) Breach. A similar erosion of the con cept of a plaintiff-proven breach has occurred in a more silent manner than the expansion of duty. Subtle concepts have wended their way into tort law, slowly obviating the old-fash ioned requirement that the complaining party must plead and prove his case. By tiny foot steps, the effective legal burden of persuasion and of proof has shifted to the defendant.

A few examples suffice to make the point. At the outset, various jural concepts lumped under the doctrinal label of "alternative lia bility" or "market share liability" radically alter time-tested legal fundamentals. In "alter native liability" theory, for instance, an injured plaintiff names all possible defendants in his action, asserts his harm (usually in painful and poignant fashion), and reclines while the court compels the defendants to prove a negative, to justify their particular conduct and nonliability. Entry-level students of philosophy recognize that proof of a negative constitutes an exceed ingly difficult task. Couple that logically neces sary fact with the natural sympathy evoked by the plight of a single injured person, and the harm incurred by defendants as a result of burden-shifting becomes patent. "Alternative liability" partakes of several common forms, most likely stemming from an admixture of the ancient English principles of liability for release of ultrahazardous sub stances and res ipsa loquitur 4 and the modern apostasy of enterprise liability. Thus, where a patient anesthetized for surgery suffers an un expected occurrence or result, the common practice encourages suit against everyone within the realm and range of possibility, with the judicial requirement that the various physi cians, nurses, aides, and scrubwomen come forth and explain why they did no wrong. Or, in a famous California case,5 two hunters fired simultaneously, each striking the victim, with one shell fragment doing much greater harm than the other; both defendants were held li able, since no one could determine which pro jectile caused the serious injury. In the modem world, where a patient reacts adversely to a drug and cannot identify the manufacturer readily, the law may hold all manufacturers of that particular drug liable for the plaintiff's harm without proof of fault or causation, and prorate the loss among the producers based upon the particular entities' share of the market.

Everlasting liability creates another morass. Conduct which not only violated no duty but also harmonized with the best and the brightest thinking at the time of performance may face sudden and significant challenge years after the deed. For example, use of asbestos in nu merous industrial contexts accorded with stan dard practice years ago; current findings sug gest prolonged exposure may cause illness in certain susceptible individuals. A particular employee may have spent his laboring years working for several companies in various in dustries and in several capacities. Time eradi cates records and erases memories. The worker complains of asbestosis (quite often increased by his own voluntary conduct, e.g., use of to bacco or marijuana), sues all employers past and present, and steps aside while those charged try to defend conduct long forgotten. Strange legal doctrines, not founded on fault, come to the fore, such as the "last injurious exposure" rule (the employer on whose premises the worker last might have encoun tered the injury-producing mechanism bears the entire loss) or some prorated diffusion of risk theory akin to market share liability. Changing political and social theories, then, not only ef fect the creation of new and greater obligations and "rights," but also penalize past actions wholly appropriate at the time of conduct by application of some notion of eternal liability.

Note also that the strange dichotomy consid ered in the "duty" analysis (higher duties for producers, diminished obligations for users) applies in the breach context as well. The cre ator, producer, or employer must be virtually prescient as to the development of knowledge far into the future, while the recipient, user, or employee need not possess even the most common fund of knowledge nor take the most rudimentary steps (e.g., first-party insurance coverage) for his own protection and well being. Another citadel has fallen, concurrent with the amelioration of plaintiff's obligation to prove breach and the growth of everlasting lia bility: statutes of limitation and ultimate repose have become marred with well-meaning but ill conceived distinctions which further deaden the chances of defense. Statutes of limitation im pose strict time limits within which to file a lawsuit and serve notice upon defendants.

Anglo-American jurisprudence has long recog nized that it is to the general good that contro versy be resolved promptly and not allowed to fester so as to cause dislocation and civil chaos; fairness also requires prompt notice to the defendant, so that he may ably defend him self before witnesses die, memories fade, and evidence disappears. Legislators have made reasonable exceptions to statutes of limitation for claims by infants and the insane. More re cently, however, judges and legislators have invoked a "discovery" rule, granting the plaintiff an extended period of time within which to sue after "discovery" of negligence and harm. While courts declare allegiance to an objective (reasonable prudence) test of dis covery, in fact the injured party is held to a THE LIABILITY CRISIS 17 minimal standard of "reasonableness." Such a development coincides with growth of ever lasting liability to render the defendants' task ever more burdensome.

(3) Causation. Traditional tort law com pelled a plaintiff to plead and prove both a di rect (cause in fact) and a proximate (legally sufficient) causal relationship between the breach of defendants' duty and the damage suf fered by the complainant. Modern legal theory has truncated direct causation and eliminated proximate causation. The result: a lighter burden for the plaintiff and a greater likelihood of a jury verdict against a defendant who ought not bear responsibility. Man assesses causality poorly. We forecast inaccurately. Mankind also errs in attribution of effect to cause, even with the gift of hindsight: judges, jurors, lawyers, and experts, not to mention witnesses, argue incessantly over the effective cause of an accident or an injury. Even looking back with care in a courtroom setting, assessment of relationship proves fraught with difficulty. Hence, reliance upon a watered-down version of direct cause opens wide the door to abuse and injustice, particu larly where the law now requires not only that the cause be merely one of many other direct causes but also that the defendant must antici pate the malevolent, tortious, or even criminal conduct of the unrelated third party which in tervenes and affects the outcome. The concept of proximate cause, whatever its inherent am biguities and defects, at least provided another judicial screen to sort out, at an early date, those matters too remote or tenuous to be coun tenanced in a reasonable system.

Why does mankind encounter such ex ceeding difficulty in assessing causal nexus? In part, because of our inherent nature, our finity, our lack of capacity for total knowledge. In part, because of our lack of observation and perception, again hindered both by our falli bility and our perspective and self-interest: every lawyer knows that parties and witnesses tend to put their own position in the best light, to advance their point of view, to shade their testimony (sometimes subconsciously) in self fulfilling fashion. In part, because causal rela tionships, particularly those involving human 18 THE FREEMAN. JANUARY 1987 action, are incredibly complex given the unique nature of each human being, the vast number of human actors whose conduct interacts, the in ability to comprehend all human and non human forces which may intertwine, the "ripple" effect of human decisions where choices do affect succeeding choices of the actor and of many other individuals in an infi nite plum tree, 6 and the like.

Next, causation has expanded for substan tially similar reasons that duty and breach have expanded, further occasioning the growth of false doctrines favoring loss-transfers to injured persons. Thus, vicarious liability theories im pose causal responsibility upon those who act without fault but who possess financial re sources (a "deep pocket"). Respondeat supe rior represents a single instance of imposition of accountability upon one (usually an em ployer) who (1) did nothing wrong and (2) pos sesses no real control over the acts of the real wrongdoer. Other examples of vicarious liability abound. A widow operating a small motel acquiesces in importuning by transient woodcutters who offer to top her trees for a fixed price and assure her of their competence; in the course of tree-top ping, the workmen drop a limb upon a neighbor and leave; the widow bears responsibility, probably without insurance coverage. Or, a friendly loan of equipment results in injury to the borrower or a third party and a lawsuit against the kindly lender. Or, a doctor or lawyer refers a potential patient or client to an other professional more skilled in the needed specialty and the latter makes a mistake; the re ferring physician or attorney finds his name listed as a defendant on a summons.

Furthermore, the law has created greatly ex tended duties upon many of us to "warn" others of risks and results of action and nonac tion. A concomitant effect: further attenuation in the proof of causation and the encourage ment of a great fiction that most individuals can and will read and heed. For example, drug manufacturers must warn of all manner of problems which may arise upon ingesting a drug or receiving a vaccine. In most instances, contraindications require many pages of fine print. Even a comprehensive litany of possible adverse reactions is truly useless precisely because we are unique individuals living in an in credibly complex world; in other words, warnings of all potential risk resides beyond the capacity of mere finite men for the identical reasons that causation is so difficult to predict by foresight or to assess by hindsight. Moreover, the law now requires warnings of great detail upon such common devices as knives and ladders. These mandated warnings often could paper the entire product. Again, as in the duty and breach analyses, the plaintiff, the employee, the user, is presumed to lack even an iota of a common fund of knowledge or good sense. Indeed, the rules have become so silly that, in some instances, a perfectly good and complete warning or disclaimer has been challenged not upon content but upon location: a court decides, after the fact, that the warning in paragraph 7 was sufficiently important that it should have appeared in paragraph 2. And, since no two of us think or act alike, the next judge may relegate the warning to paragraph 19! To cap it all off, it is idle to assume that (1) most people can read, (2) most people will read, and (3) most people will change their course of conduct, even with the appearance of a hypothetical "objectively perfect" warning!

(4) Damage. No less a revolution has taken place in the extent and proof of damage awards for personal injury. Once again, after a brief preface, several examples selected from a great array will prove the point. The common law recognized three categories of damage: special, general, and punitive (ex emplary). Special damages normally compen sate an injured party for out-of-pocket losses: medical, hospital, drug, and therapy bills; lost wages; and the like. General damages consti tute an attempt to measure physical, mental, and emotional loss and future inspecific harm by monetary value: hence, an injured person may recover for lost opportunities or injury to his reputation emanating from slander; for emotional scars and stress resulting from pro scribed discrimination; or, for the infamous "future pain and suffering" and loss of earning capacity stemming from a careless automobile accident or a botched surgery. Punitive damages represent a civil penalty (beyond any actual loss) awarded by the law to the injured party, designed not to replace the plaintiff in his proper position from which the act of the defendant removed him, but to deter outra geous or socially undesirable conduct. Except in the unusual case governed by precise statu tory or contractual language, the victorious party does not recover his reasonable attorneys' fees as damages.

Proof of "damage" has become a fine art in the skilled hands of plaintiffs' counsel and compliant "experts." By the time the parties reach the courtroom, the natural sympathy ex uded by all of us for the unfortunate may be intensified by clever before-and-after portraits of the victim. Evidentiary rules concerning ex pert testimony have washed away, permitting all manner of academicians and "experts" to work econometric alchemy by charts, graphs, and incantations, premised upon highly un likely assumptions, all purporting to demon strate that an injury may be translated into a very substantial dollar loss. The development of these norms has been quite one-sided: for example, in many jurisdic tions, the defense may not inform the jury that any general damage award is non-taxable; the plaintiff freely implies that he is starving and penniless, while the law forbids the defense from demonstrating the existence of "collateral source" income (e.g., payments received by the plaintiff under private first-party insurance coverage, Social Security, various other legis lative programs, trust funds, and the like); the forensic economist indulges in the fiction of eternal celibacy for a widowed surviving spouse as a necessary part of his concocted sta tistics, while the defense may not prove a pending or existing remarriage or substitute re lationship; the expert assumes prudence in in vestment and moderation in life when he calcu lates damages, while the jury remains ignorant of the true-life spendthrift nature of the injured party.

A further doctrine feeding the increase of damage awards may be uncovered in the heightened use of punitive damage judgments in all manner of cases. In earlier years, a claim for exemplary damages consituted a most ex traordinary occurrence; it is now commonplace in the most simple and harmless of cases. The law ought not command overpayment to the THE LIABILITY CRISIS 19 plaintiff; to do so infringes upon the province of the criminal court and produces extreme asset transfers based upon passion instead of good sense. Human beings act much too liber ally with other people's money; when they re ceive free reign to "punish" conduct which they subjectively believe to be "wrong" only mischief can result. Judges and jurors freely award millions in sympathy and anger, yet those same citizens would not contribute a mo ment of time nor a dollar from their pocket to the "hapless victim."7 An additional jural element plagues the realm of damage awards: the traditional con cept of "joint and several liability." Simply put, this doctrine provides that if plaintiff sues D1, D2 , and D3 for her harm, and the jury finds the plaintiff blameless, D1 responsible for 75 per cent of the injury, D2 responsible for 20 per cent, and D3 responsible for only 5 per cent of the loss, the plaintiff may collect the full amount of her judgment against anyone of the three defendants, regardless of the size of their contribution of actual fault. 8 As it happens, D1 and D2 may be missing or insolvent, so D3 must bear an inordinate burden - and, quite often, D 3 may be so far removed from reason able accountability that he would have pre vailed in the absence of the extensions of duty, breach, and causation considered heretofore.

Few, if any, jurors recognize this twist in the law and one might surmise that they imposed a five per cent finding of fault upon D3 as an af terthought, a mistake, or a poorly conceived "message" sans real consideration of right and wrong. Bankruptcy statutes provide one additional ingredient worthy of note. In recent years, some manufacturers and other "target" defen dants faced with a large number of potentially ruinous claims have sought the shield of bank ruptcy, insolvency, and other debtor-protective laws in an attempt to keep the business afloat and to ameliorate or spread the loss. A growing legal trend denies full and equal protection to these penitents, apparently founded upon the politics of envy. A libertarian cannot readily accept bankruptcy codes in a world of pristine purity; however, denial of equal access on the basis of wealth or productivity certainly con stitutes a discrimination as vile as others for 20 THE FREEMAN. JANUARY 1987 which mankind receives regular chidings these days.

C. Outmigration and Market Disarray The unprecedented extension of liability causes all manner of producers, professionals, and providers to leave the market. By nature and necessity, development and innovation in providing goods, services, and ideas bring risk, and entrepreneurs constitute exceptional risk takers. A portion of a producer's return com pensates him for the risk incurred, just as other profits reward him for his knowledge, his inno vation, his diligence, and his foresight. Some entrepreneurs develop enterprises by diffusing the risk of the venture, thereby par tially insulating each individual from the full effects of the most likely costs. The limited lia bility afforded by law to limited partnerships and corporations provides one common mode: each venturer takes "a piece of the action" but limits his potential loss to the amount of the investment. Another redoubtable protection de veloped in the Sixteenth Century: insurance and reinsurance against specified liabilities or casu alties. In essence, the insurance carrier assumes some of the risks of a venture in exchange for a premium, a price calculated upon a forecast of danger premised on human action and history.

The decline in insurance capacity is considered hereafter in Section II. D. When traditional methods of risk diffusion disappear, or when the penalties employed im pose unanticipated and seemingly random risks upon the productive, or when the extent of lia bility exceeds the reasonable expectation of re turn, the entrepreneur abandons the market and employs his capital, knowledge, and skill else where, in a place where he can achieve "more bang for his buck." These results are taking place currently across the country, in increasing fashion. Once again, some naysayers dispute the ac curacy of this contention of dislocation. Both empirical and rational evidence support the thesis, however, although human beings do en counter difficulty in assessing causality and perceiving historical events occurring before their very eyes; it seems to be a human failing to comprehend essential cause-and-effect rela tionships and significant principles of human action much more cogently from a distance in time.

Nonetheless, observation offers proof. The increase in duty and damage, and the concomi tant amelioration of breach and causality, render it increasingly difficult to anticipate risk and plan accordingly. With certainty and pre diction, the provident provider can foresee dangers and spread the risk; in a random world, no man functions with any modicum of effi ciency, and fear and frustration soon cause him to give up altogether~ after all, life is too short for the creative to abide by the disharmony of the litigatory society. Again, the cost of risk diffusion in an accelerating world of liability may become sufficiently great so as to price the product or the service out of the market, thus depriving the non-litigant consumer of his full range of choice. Finally, the risk-spreading ac tivity of the liability and casualty insurance in~ dustry may be significantly deterred in like manner, drying up that avenue of protection.

Thus, proof abounds for the perceptive ob server. For example, in medicine, specialists curtail or terminate lucrative and otherwise sat isfying practices early, and dissuade their off spring from the profession. Successful corpora tions find no one willing to serve as an outside director. Quality legal and accounting firms refuse specific "dangerous" kinds of practice. Manufacturers close out profitable lines as a preventive measure. Inventors and investors re strain research and development of new drugs, or machines, or processes, while their foreign counterparts-unhindered by any "liability crisis' ,- forge ahead and build new enterprises based upon creativity and innovation. Em ployers fear recrimination so much that they accept the "lowest common denominator" re sulting from an inability to manage, penalize, and discharge, with the necessary outcome of shoddy work, poor service, and bad ideas. The list goes on, like a disharmonious version of an unchained melody. In essence, the wheels of production have been grinding to a slow but sure halt for some years: we are, and have been, living for decades upon the largess of rel atively unfettered creative action and sacrifice of our ancestors.

THE LIABILITY CRISIS 21 The Subscription Room at Lloyd's. w > Iua:«zz« ~ ~w OJ w I fAstute observers, like Frederic Bastiat and Henry Hazlitt, have taught us to seek both "the seen and the unseen." Their exhortation de serves attention. One might cry out, "what's one surgeon (or druggist, or lawyer, or piece of machinery, or antibiotic) more or less? We enjoy a surfeit of such provisions, and others will take their place. No one is indispensable!" Unfortunately, two things occur, both dis tasteful: first, the replacements tend to be less skillful, caring, and creative, since individuals of highest character and caliber tend to compre hend the natural rules of order most astutely and to adjust to disagreeable circumstances most quickly; second, after a while no replace ments will exist, as the problem intensifies and a distended State, vainly attempting to cope with the current "crisis," does all the wrong things at the wrong times.

Whatever one's personal view of the moral issue, relatively few contraceptive devices or drugs remain on the market today, compared to a decade ago. The few remaining manufac turers of "DTP" vaccine (which has saved millions of children from suffocating death) have raised the price three-fold, with no end in sight. Employers refrain from hiring workmen who exhibit the slightest precondition to illness or injury, fearing the possible catastrophic con sequences to that individual, his fellow workers, the consumer, and the business if the pre-existing condition becomes manifest in a manner which occasions a major or a minor misfortune. Hence, the obvious consequence of "the liability crisis" in this regard might be characterized as a "market shakeout," whereby creators and producers concerned with cost and loss abandon the enterprise for less risky ventures; the deeper "unseen" conse quences involve a great misallocation of re sources and contravention of the subjective de sires of the buying public, a grand attempt to avoid risk and achieve everlasting security, and an eventual destruction of the market, a route which guarantees the most risky and least se cure existence possible.

D. A Crisis in Capacity Insurance developed as a market response to the need for risk diffusion in the late Middle Ages. A thriving trade depended upon the car riage of goods by sea, and the sea proved to be a dangerous and sometimes whimsical adver sary. The merchants whose vessels survived storm and piracy enjoyed great profits; the traders whose goods perished (often along with the crew) suffered financial calamity. Entrepre neurs who frequented Lloyd's Coffee House on London mornings devised a plan of selling shares in ocean-going ventures, pledging per sonal assets in syndicated fashion so as to share gains and spread losses. From this unstructured beginning arose an industry which has provided 22 THE FREEMAN. JANUARY 1987 a method of risk diffusion sufficiently mal leable and effective to permit adventurous mankind to break out of the ordinary barriers imposed by the possibility of catastrophic loss.

By the twentieth century, myriad modifications allowed most individuals and entities to insure against all kinds of ordinary dangers involving liability or casualty (e.g., death, personal in jury, fire, theft, earthquake, litigation, and the like), not to mention life, health, and disability risks. No legitimate question may be raised con cerning the decline of capacity, or the ready availability of liability insurance. Insurers de part the market in droves as a result of the liti gation~ and liability explosion, either directly (through insolvency or bankruptcy) or indi rectly (by means of a business judgment de signed to avoid insolvency, bankruptcy, or un toward and unrewarded risk). Private insurers stay in business only to earn a profit. Profit emanates from two primary sources: premium income and investment in come. In many special lines of liability cov erage, the industry pays out $1.40 or more each year for each $1.00 of premium income re ceived. Astute investments have enabled some companies to survive this aberration in the short-haul, but few of us possess sufficient charitable traits to continue losing money on the premium side of the equation. Hence, in surers leave the field, either redeploying assets elsewhere or dropping entire lines of coverage.

Statists exacerbate the situation by decreeing that all insurers must accept certain heightened risks (e. g., assigned risk pools for automobile liability coverage) and must not "discrimi nate" even if the private carriers' choice rests upon sound reason. 9 To make matters worse, the usual collection of demagogues harangue for edicts preventing insurers from leaving the field and for rules prohibiting nonrenewal of policies at expiration "without cause" (and, guess who defines "cause"). While the litigation expansion affects all fields of life and law, the primary assault has penetrated "special lines" or "long tail lines" of liability insurance, the type of coverage nor mally employed to protect against the risks of tort claims, e.g., professional malpractice, product liability, and the like. Properly used, liability insurance provides a regulating and planning device for avoiding risk and encour aging commercial market transactions. This function rests upon reasonable predictability and stability; in a free society, one by-product is lower cost coupled with greater certainty.

Liability insurance represents a promise to pay in the future upon the occurrence of a cer tain event, for example, upon a bodily injury for which the insured must bear legal responsi bility. The farther out into the future one pro ceeds, the more difficult it becomes to predict such matters as changes in the law, alteration of societal values, the expected standards of busi ness and professional performance, and the like. Yet, special lines of insurance often have a long "tail" of some eight to ten years out from the date of receipt of premium, which compounds the effects of errors in prediction: a premium is paid and the term is set in year one, yet the manifestation of harm and the resultant litigation may not occur until year five, or eight, or ten. Risk aversion has been greatly complicated by expanding and increasing uncertainty in the law. The analysis in Section II.B. has provided a cursory overview of some of these jural modi fications which have intensified the problems of certainty and predictability for insurer and insured alike. In summary, some of the leading components of uncertainty include (1) the growth of expectation of risk protection at all levels of society; (2) highly variable actual monetary inflation with the "ripple" effect that this variability causes both in velocity of ex change and in future predictions; (3) unprece dented and unanticipated changes in standards of expected performance, leading to unantici pated claims five, eight, or ten years in the fu ture; (4) wholly unpredictable legislative and judicial changes regarding insurance policy in terpretation as weU as elements of proof and content of duty; (5) the escalation of legal fees, and concomitant costs of decision-making, on the part of both prosecution and defense of tort cases; and (6) a social inflation which includes a tendency to employ insurance products to solve all "social ills" perceived by various ele ments of society but actually unrelated to the insuring agreement.

Loss of certainty and predictability, coupled with actual loss on premium dollars, explains the decision of many insurers to curtail unpro ductive and risky lines of coverage and to allo cate investment assets elsewhere. Indeed, these decisions partake of the same elements as those which affect the outmigration of producers and providers discussed in the preceding Section II.C. The two elements intertwine: the insurer departs from the market or raises its premium and restricts its coverage in reaction to the liti gation and liability explosion, thereby causing the seller's side of the market to shrink; the in sured professional, producer, or provider faces restricted coverage, rapidly increased premium costs, and a reduction in choice as a buyer of the insurance product; thus, the aspects dis cussed in Section II.C. encourage top producers to depart from the buyer's side of the market, a tendency which merely intensifies the parallel phenomenon afflicting the seller's side. The re sult: market disarray and shrinkage, deprivation of choice, and a decline in the satisfaction en joyed in a free society.

III. CAUSES OF THE CRISIS Many commentators have offered flawed theories concerning the cause of "the liability crisis. " Few have looked beyond the apparent to seek the real. An abundance of demagoguery persists, with fingers pointed at insurers, at torneys, litigants, and the judicial system. A quick view· of these imagined "causes" ought to dispel any notion concerning their validity, and should lay the groundwork for insight into the true cause and its results. A. Four Imagined Causes The insurance industry provides an obvious scapegoat. Carriers suffer losses, raise pre miums, reduce coverage, act selectively, and sometimes depart from the field altogether. To the demagogue, these commonplace market ac tions violate his ardent and ancient economic fables, so he assigns fault accordingly. Insurance traducers flay their victims with allegations of "excess" or "windfall" profits in an era of constant loss, ignoring the truism that, in a market, a profit deserves no adjective inasmuch as it represents the increment of THE LIABILITY CRISIS 23 value beyond cost placed upon the good or ser vice by the voluntary purchaser. Similarly, the anti-insurance lobby rails at carriers for making poor investment decisions, and subsumes some odd sort of unfairness if the carrier increases premiums to cover such losses; the successful insurer, to the contrary, has made prudent in vestment decisions over the past several years, and this prudence has enabled some companies to remain in business at a time when premium dollar income has proven woefully inadequate to cover claims losses. In any event, in a market, the insurer may charge what the buyer wishes to pay for a risk diffusion service, and motive plays no role.

A related attack challenges the power of a carrier to cancel a poor risk, or to fail to renew for whatever reason; this challenge rests upon some obdurate notion of anti-discrimination or inherent unfairness. The position is inherently inconsistent: should the insurer be forced to maintain its relationship at the same premium level forever upon entry into a contract despite changes in time or circumstances, and no matter if the contract expires after a specified term? Would the insured endure the same en slavement, or would he possess the absolute right to shop for a better deal and cancel at any time? How can logic justify different treatment in this context? Finally, critics shriek "conspiracy" among the myriad competitors in a highly fragmented industry, supposing that hundreds of insurance companies band together to "fix prices" and restrict the market. One can assume that if a lucrative market existed on the capacity side, new carriers would enter the field promptly.

Thus, the contention that the insurance industry has caused "the liability crisis" comes up wanting. Lawyers also receive their share of oppro brium. The public views the bar as an over crowded and avaricious profession, diligently fomenting lawsuits and inveigling otherwise decent citizens into improper and foolish ac tions. This surmise overlooks the independent character and downright stubbornness of most citizens; very few Americans betray their basic principles at the importuning of another, and no attorney can proceed without a client. Those who consider lawyers to be menda24 THE FREEMAN. JANUARY 1987 cious troublemakers often assail the contingent fee as a causative factor in producing the ,'crisis. " In a contingent fee arrangement, the client in a bodily injury action agrees to pay the costs normally associated with preparation and trial of his case except for the attorney's fee; the attorney agrees to take the case "on a con tingency," and shares in any settlement or ver dict, receiving nothing for his time and effort in a losing cause. While some Codes of Profes sional Responsibility abhor the practice, in many cases the attorney also advances substan tial costs of the lawsuit, particularly in payment of "expert witnesses" (who also may be serving on a contingency) and other trial prepa ration expenses.

Unfortunately, the attack upon the contin gent fee is an attack upon the freedom to con tract; in addition, since the contingent fee does not cause the problem, the attack constitutes wasted effort which incidentally wounds lib erty. One might disparage the contingent fee as unwise insofar as the lawyer becomes a subjec tive participant with a "piece of the action" in stead of an objective advocate, but those who enter such a bargain are better able to determine their subjective desires than is some lofty codi fier apart from the fray. A better rule, and one adopted in a number of English-speaking provinces, would require the lawsuit loser to pay a reasonable attorneys fee to the successful party; in addition, where the plaintiff (upon filing) does not display fi nancial stability which would enable him to discharge such an obligation (which may ex ceed $100,000 in a critical case) the law might require the plaintiff to post a bond or to secure guarantors for the potential debt. Indeed, a lawyer truly wedded to a contingent fee case might be willing to stand as surety and place his or her assets behind the cause.

A third body of opinion lays blame at the feet of litigants on one or both sides of the aisle. Some chide defendants as careless and un caring; others contend that plaintiffs are greedy and lazy. Parties in most actions are indi viduals, singly or banded together, who partake of the same human condition as the rest of us: no better, no worse, just mill-run folks trying to live as disorderly creatures in an orderly world. To some extent, then, the proponents of this position are correct: "the liability crisis" re sults from human failings, but those frailties are poorly understood, as demonstrated in Sec tion IILB., infra. Finally, the judicial system comes in for its raps. Judges, jurors, legislators, bureaucrats, lobbyists, and all manner of individuals related to the justice system and the political apparatus receive their forty lashes from particular parties to the debate. One could comment upon the lost courage of judges who, in a common law system, ought to exercise a screening function, just as one may decry the tendency of juries to liberally and carelessly disburse other people's money in a grand display of envy and spite.

Legislators and their bureaucratic aides have created a whole new universe of "rights" which are not right and which compound ex isting wrongs. Indeed, of all the imagined causes, the "system" may be at fault in the normative sense but, as with the litigants, chal lenge to the "system" proves to be rather meaningless camouflage. In final analysis, our juridical system mirrors society, albeit with a warped mirror reminiscent of our days in the carnival fun house. B. The Cause and Its Results (1) Cause. Results often flow from the ap plication of deceptively simple causes. This general rule applies to "the liability crisis": the effects decried result from a noteworthy human frailty, the inability or unwillingness of each of us to make fine distinctions and to live con sistent lives. Inconsistency and discord mar mankind and constitute a portion of the human condition; in the present context, this discrep ancy causes each of us to place impossibly high standards upon our opponents while imposing nominal obligations upon ourselves. Thus, a doctor or a manufacturer or an employer is re quired to exercise superhuman efforts to insure safe and pleasant results, while a patient, ·a user, or an employee need exercise but minimal care and foresight.

Proper positive law provides necessary gen eral rules for peaceful resolution of human dis putes, general rules of conduct patterned, in sofar as is possible, upon the natural law of order and obligation, of cause and consequence, which undergirds our universe. The aforementioned refusal to make and abide by fine distinctions warps these general rules, with each participant seeking to create an exception for his cause all the while pinning his adversary to the strict stanchion of the law. This tendency is analogous to the advocate of freedom who attempts to rationalize trade barriers, subsidies, or market entry restrictions in the "special case" of his industry or enterprise. No differ ence exists between the subsidy-seeker and the litigant who argues for extended liability, at tenuated concepts of breach and causation, and expanded damages. The siren songs of egalitarianism, entitle ment, and enterprise liability (fed by the un lovely and all-too-human traits of greed, envy, and jealousy) pander to this quest for excep tion, this establishment of multiple standards which mocks any semblance of "equality be fore the law." Redistributionist theories of wealth transfer and codified attempts to enforce an unclear and unattainable "fairness" coin cide to justify legalized theft as a balm to thwarted but unrealistic expectations: it seems foolish to expect perfection of others if we do not seek it for ourselves, yet the modern legal "progressives" turn the Golden Rule of Jesus Christ and the Silver Rule of Immanuel Kant (' 'Act only on that maxim through which you can at the same time will that it should become a universal law.") upon their respective noggins.

The lack of consistent conduct and ideolog ical sensibility displays another facet: the rapid decline in personal accountability. Responsi bility requires the actor to accept the conse quences of his conduct without a whimper; it does not permit him to shunt the untoward re sults of his acts and errors unto the unwilling shoulders of another. 10 Nonetheless, while most individuals profess a love for personal freedom, few are willing to live with the results of their own errors, or the pitfalls naturally af flicting a disorderly man in an orderly universe, or the consequences of the interplay of human action where each party merely performs as an ordinary fallible human being. Coupled with the innate difficulty of comprehending cau sality and long-term effects, this tendency pro duces a "beggar-my-neighbor" legal system THE LIABILITY CRISIS 25 where Bastiat's metaphor of a circle of pick pockets applies most assiduously!

(2) Effects. Thus far, I have alluded to myriad results of this cause in providing de scriptive examples for textual statements. Ex amples are not exhaustive; they serve to iden tify and to provoke, not to end the discussion. A few highlights, some of them redundant, may provide useful illustrations of a long-range disquieting consequence already set in motion by "the liability crisis. ' , First, insurance carriers no longer enjoy the right of selective underwriting, a right which ought to exist under any reasonable concept of freedom of contract, and one which permits the channeling of conduct into safer modes. The current trend of assigned risk pools, aggressive state regulation, statutory limitation upon non renewals, and sibling ideologies, render the in surer impotent to freely choose the least risky enterprise to insure and thus encourage care in a free society. Actuaries err, as do we all, but fundamental freedom and the basic rules of human action dictate that the channeling func tion can be performed only in a market.

Second, over the long haul, efficient busi ness becomes inefficient business and, absent the reversal of things in motion, commerce will eventually grind to a halt. The law has become a schizophrenic intruder: no way exists to har monize the competing codified mandates of reduced risk, diminished price, increased "reg ulation" and higher wage, let alone "egali tarianism, " "anti -discrimination, " "pro competitive," and "fundamental fairness" rules, except in a market system; the very exis tence of these infernal and vexatious norms dooms any notion of freedom. As a result, managers can't manage, owners lose the right to control the fruits of their labor, sloppiness, shoddiness and false swearing become the rule of the day, and the well-intentioned but poorly conceived laws designed to promote safety, well-being, and plenty produce just the oppo site results. Even those nominally principled persons, who would abide by general rules of good behavior in many instances, renounce principle and join the throng to milk the system; after all, why pay for something that is free?

26 THE FREEMAN. JANUARY 1987 Third, greed and envy translated into high verdicts for faultless conduct penalize the un protected innocent. The "odd man out" poses a very real concern. More poignantly, the con sumer or employee who wishes to accept a nominal risk is denied his opportunity where the costs of litigation cause producers to leave the market or products to disappear. Suppose a wonder drug or vaccine allegedly causes death or injury to one patient in one million; the re sulting litigation forces all manufacturers to withdraw the compound; who cries for the 999,999 individuals who wish to take the drug, whatever the risk, in order to avoid death or crippling disease? Fourth, the disintegration of accountability causes manifestations far beyond the scope of this essay. Loss of responsibility afflicts us all in realms of economics, politics, law, the ology, philosophy, education, indeed in any discipline of pertinence. Certainly, self-respon sibility declines when those who smoke to bacco, imbibe alcohol, or eat ice cream to ex cess complain of, and recover for, allegedly resultant lung, liver, or lipid disease. It disappears when a worker refuses to purchase first-party coverage, spends his paycheck as he desires, suffers an injury or loss, assigns the cause without reason to a covered entity, and enjoys-free-the benefits his fellows have paid for voluntarily over the years. Strangely, those who bleat most loudly about' 'social jus tice" ignore the pervasive injustice necessarily and eternally flowing from their bad ideas and worse acts.

IV. THE CRISIS CAN BE CURED Complex problems do not always yield easy answers, particularly when those problems stem from pervasive assumptions which are just plain wrong. In the present case, the solution to "the liability crisis" is clear: an application of increasingly large doses of liberty; the method ology of the application is complex, given the human trait of avoidance of responsibility. Self-responsible people, accountable people, free people have neither the time nor the incli nation for needless lawsuits. Pettiness and bickering mark the slave society, not the free society, where men and women solve most of their interpersonal problems short of access to a court of last resort. Thus, "the liability crisis" will be ameliorated by the release of creative human action. Those who seek to extend lia bility and increase damage verdicts by em ploying the legal process to impose impossible or tyrannical obligations upon others do so out of a fear of accountability for their own actions, a belief that someone else must pay their way.

These false ideologies-entitlement, egalitar ianism, and enterprise liability -can only bring gloom. What premises underlie the free society? The basic principles include a commitment to per sonal freedom, individual responsibility, a market economy, respect for private property, and limited government, all designed to un fetter individual energy in the creative realm. Rational, empirical, moral, and theological proofs demonstrate beyond cavil that human problems are always solved more quickly, fairly and appropriately in a state of relative lib erty. Many of the proposed "solutions" suggested by commentators and lobbyists interested in "the liability crisis" partake of government regulation and Draconian limitation: "caps" (limitations) on general damages, restrictions on contingent fee arrangements, mandatory state insurance pools, increased regulation of the insurance industry, elimination of selective underwriting, and a host of others. Such bar riers to market entry accomplish nothing but exacerbation of problems. The press worthy panjandrums of the day iterate' 'bold new solu tions" which, upon examination, turn out to be the same failed socialism of the past: increased regulation, expanded codes of prior restraint, and other innate foolishness.

One might accept a few of the nominal sug gestions put forth from some quarters: elimina tion of punitive damages; obliteration of joint and several liability for unrelated defendants; revival of a judicial screen designed to prevent a tyranny of the majority; an award of attorneys fees to the victor to be paid by the loser; and the like. But these band-aids will not staunch the hemorrhage. Free man deserves and requires an open textured legal system: a few fundamental rules of good conduct quickly and ably enforced, fully understood by all members of so ciety, restraining destructive action: positive norms forbidding and penalizing the aggressive use of force against another; barring deceitful and fraudulent conduct; requiring adherence to freely entered contracts; affording a mechanism for the resolution of otherwise insoluble dis putes which invariably arise amongst the citi zenry; and permitting the orderly construction and continuance of the necessary governmental apparatus to carry out these few important functions. No state has adequately discharged these necessary functions; how could we expect such a flawed entity to perform well in chan neling creative human endeavor?

Suppose that my thesis is correct, that the so-called "liability crisis" is merely one of many manifestations of an all-encompassing liberty crisis which detrimentally afflicts every aspect of our lives. How then do we implement the solution? The answer resides within each of us. Each individual in society must learn to act consis tently with principle, make fine distinctions, exercise the restraint mandated by self-govern ment, and continue on his never-ending quest for knowledge and propriety. Leonard Read's truism concerning the ultimate effects of the loss of a belief in accountability finds a ready home in this regard: personal freedom cannot exist without individual responsibility, and un less we wish to live in a ring of pickpockets1. "Tort," in the legal lexicon, refers to a civil injury to a person, his reputation, or his property done by another. Traditionally, our common law of torts dealt with intentional and unintentional wrongs, the former often also constituting a crime punishable by the state, the latter premised upon a lack of ordinary prudence in car rying out one's everyday affairs. The very causes which will be considered hereafter have resulted in a blurring of these traditional distinctions and an increased haziness of these fundamental con cepts.

2. For one example, the law of contracts has long accepted Ro manist modifications which obviate the need for each man to abide by his solemn word (of course consent obtained by duress or deceit does not constitute consent at all, and forms quite a different in quiry). The current expansion of the "ameliorating" contractual de fenses of "mistake," "impossibility," "commercial frustration ," "commercial unreasonableness," and the like, create an analogical quagmire resembling the mess in tort law. Other examples abound in such disparate fields as securities issuance and regulation, anti trust barriers to market activity, employment rights and remedies, and the like. 3. One should recognize that an individual or entity may, at dif ferent times or at the same time, fall within both broad categories. Human inconsistency being what it is, the same party may display the same categorical tendencies in each position, demonstrating a curious legal and moral schizophrenia.

4. Res ipsa loquitur means, literally, "the thing speaks for it self." It was employed in the later common law where a plaintiff THE LIABILITY CRISIS 27 or worse-the recapture of liberty is impera tive. ll Vigilance commands us to look within for the seeds of destruction which take root without: for example, those who create excep tions for themselves cause consequences far beyond the perimeters of their immediate ac tion; those who torture new meanings into "force," "fraud," and "duty," occasion a rippling loss of liberty for us all. Note well that "the liability crisis" will not disappear in a puff of smoke even in the wake of that highly improbable event, the immediate development of a free society. All too many in dividuals prove to be summer soldiers, leaving the standard of freedom when personal problems beset them, or when they mistakenly assess causality and assign a villain's role to the free society, or when radical and rapid im provement does not take place before their very eyes. We lose liberty by miles, regain it by inches, and our recapture must be painfully slow as a result of our imperfect rational pro cesses.

The analysis in this paper and the solution to "the liability crisis" presents nothing novel: our betters of the past have offered like solu tions, to like problems, employing like prin ciples. Unfortunately, a lesson forgotten is a lesson unlearned; it is mankind's misfortune that each of us must relearn the lessons of the past. 0 suffered injury by means of an instrumentality controlleq by a de fendant, although the plaintiff could not identify the actual breach of duty and causal nexus. 5. Summers v. rice, 33 Cal 2d 80, 191 P2d I (1948); compare Restatement (Second) of Torts § 433B. Contra: Anderson v. Maloney. III Or 84,225 P 318 (1924). 6. Ex. 20:5, 34:7; Deut. 5:9. 7. This circumstance resembles the wealthy Senator who wildly taxes and spends his constituents' hard-earned funds for grandiose schemes beloved by the lawmaker-but not so much favored that he would support them voluntarily by his personal contribution!

8. In most states, some juridical idea of contribution among joint tortfeasors and/or indemnity exists. The rules in this regard are so diverse and complicated that further discussion would serve no useful purpose. In the example-an all-tao-perfect portrait of the real world-a right to indemnity or to contribution by D3 would afford small solace where D I and D2 are insolvent. 9. For example, the District of Columbia has recently decreed that health insurers cannot exclude carriers of AIDS virus from cov erage. Or, insurers may not recognize inherent actuarial male/fe male distinctions. Mere recitation of governmental nonsense ap proaches infinity. 10. Ridgway K. Foley, Jr., "Individual Responsibility," 26 Freeman (No.1) 42-51 (January 1976). 11. Ridgway K. Foley, Jr., "On Recapturing Liberty," 29 Freeman (No.5) 304-14 (May 1979).