E. The Triumph of Compensation and Loss Distribution Policies

Author:Philip H. Osborne
Profession:Faculty of Law. The University of Manitoba

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Throughout most of the twentieth century, the conventional wisdom was that the central and largely equal functions of tort law were the compensation of harm and the deterrence of wrongful conduct. It is now apparent that there is a substantial imbalance between these functions. The prevalence of liability insurance, the popularity of loss distribution policies, and the pro-plaintiff bias of the judiciary, particularly in personal injury cases, has led to a much greater emphasis on compensation as the predominant function of tort law. The capacity of tort law to influence personal conduct has diminished and the primary responsibility for public safety has shifted to statutory regulation and the criminal law. Tort law has some residual deterrent power but it is haphazard and uneven in its impact.

This evolution has wrought a fundamental change in the tort system. It has evolved from a fault system that was designed to burden the defendant with the consequences of his own wrongdoing to a fault/insurance system that burdens the public, or a segment of the public, with the consequences of the defendant’s wrongdoing. This transformation has occurred without any conscious decision of any judge, legislator, or policy maker. Nevertheless, the reality is inescapable. In general, tort law no longer deals (other than as a formality) with the question of whether the defendant should pay. It deals with the question of whether the public should pay. In practice, there are two ultimate outcomes of almost all tort actions for damages. The loss is allocated to the public or to the plaintiff.

This reality has not, however, penetrated formal tort rules, which continue to be premised on the assumption that defendants pay awards of damages out of their own pockets. This profound disconnection between loss-shifting rules and loss-spreading realities presents a funda-

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mental challenge to the judiciary in this century. There are a number of possible approaches to the conundrum.

First, the tort system may continue as it has in the past, supported by a belief that while it may not perform any one of its functions well, it is, nevertheless, a beneficial legal institution, and by a conviction that neither socialized universal no-fault schemes nor systems requiring citizens to protect themselves from accidental losses with first-party insurance offer better alternatives. The loss-shifting system backed by extensive liability insurance will remain...

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