Tort, Social Security, and No-Fault Schemes: Lessons from Real-World Experiments

By Wagner, Gerhard | Duke Journal of Comparative & International Law, Fall 2012 | Go to article overview

Tort, Social Security, and No-Fault Schemes: Lessons from Real-World Experiments


Wagner, Gerhard, Duke Journal of Comparative & International Law


In dealing with the problem of personal injury, societies have to make a choice between regimes of tort liability, the general social security system, and tailor-made no-fault compensation schemes. The arguments bearing on this choice are complex and difficult to justify. However, in one important area most industrialized countries operate a no-fault scheme already, and have done so for almost a century, namely workplace accidents and occupational diseases. In spite of the long tradition of workers' compensation systems, it is unclear whether they are a good or a bad thing. A few decades ago and thus relatively recently, two jurisdictions--the United Kingdom and the Netherlands--have abandoned workers' compensation for a combination of employers' liability with rather generous protection under the general system of social security. Now the time has come to review the experience of these jurisdictions and compare it to the performance of workers' compensation systems that continue to operate in much of the rest of the industrialized world. One recent and important example that highlights the differences between the two approaches involves the way each deals with claims for compensation of diseases caused by asbestos. The asbestos cases also illustrate the current challenges faced by workers' compensation systems: tort suits brought against employers alleging intention or other forms of aggravated fault and launched against third parties under theories of products liability. In the United States, workers' compensation systems have been pushed aside by mass litigation, where manufacturers of equipment and raw materials are named as defendants. This development has no parallel in other jurisdictions and raises important policy issues that are ripe for a fresh discussion.

INTRODUCTION

I. SYSTEMS OF WORKERS' COMPENSATION: BASIC FEATURES
      A. Compensation Regardless of Fault of Employer and Contributory
         Fault of Employee
      B. Insurance and Collectivization of Claims
      C. Scope of Protection
      D. Limited Compensation
      E. Resolution of Disputes Out of Court
      F. Immunity of Employers from Damages Suits

II. EMPLOYERS' LIABILITY: BASIC FEATURES
      A. Liability in Contract and Tort
      B. Four Features of Private Liability Systems
      C. The Trinity of Defenses
      D. Full Compensation
      E. Dispute Resolution through Litigation
      F. No Insurance and Collectivization of Claims

III. ECONOMIC ANALYSIS OF WORKERS' COMPENSATION
      A. Efficient Deterrence
         1. Efficient Deterrence from a Torts Perspective
         2. Efficient Deterrence in Employment Relationships
            a) Coasean Bargaining
            b) Bargaining in the Real World
            c) Empirical Evidence for the Efficiency of Workers'
               Compensation Systems
         3. Efficient Employee Behavior
            a) Irrelevance of Contributory Fault
            b) The Importance of Employee Behavior for Efficient
               Deterrence
            c) Justifying the Disregard for Contributory Negligence
     B. Efficient Risk Bearing
        1. Wage Premiums and Strict Liability Compared
        2. Fault-Based Liability vs. Strict Liability
     C. Efficient Administration of Claims and ex post Moral Hazard
        1. The Advantage of Workers' Compensation Systems
        2. Containing ex post Moral Hazard and Abuse within Workers'
           Compensation Systems
        3. Balancing the Costs and Benefits of Controls against Abuse

IV. REAL-WORLD CHOICES BETWEEN WORKERS'
    COMPENSATION AND EMPLOYERS' LIABILITY
    A. The Motives for the Revival of Employers' Liability
       1. Getting Rid of the "Industrial Preference".
       2. Social Security as Basic Protection, Tort as a Supplement
    B. The Failure of Social Security
    C. Tort as an Indispensible Fall-Back Mechanism
    D. Asbestos-Related Diseases as a Touchstone of Liability Systems
    E. Conclusion

V. CIRCUMVENTIONS OF WORKERS' COMPENSATION SYSTEMS
    A. 

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