Tort, Insurance and Ideology

AuthorJane Stapleton
Publication Date01 November 1995
Date01 November 1995
Insurance and
Jane Stapleton
When misfortune befalls an individual, our social and legal arrangements may
provide a variety of responses other than to let the losses associated with it lie
where they fell. For example, the misfortune may have been the subject of private
taken out by the victim and at a level the victim chose. The risk of the
misfortune may have been
by being covered by, say, a scheme of social
insurance or social welfare. A third response is
of the victim, that is
provision to the victim of a financial measure which attempts as far as money is
able to return the victim to the position he was in before the misfortune occurred.
Clearly, tort qualifies as a form of the third response because the measure of
damages in tort is restorative of the victim; but is it also a form of the first two
responses and, if so, what are the ramifications of this?
Each of these three responses has its own rationale and, though any combination
of responses may be triggered in the event of a misfortune, they often compete as
alternatives in public policy debates about misfortune. Over time, the outcome of
this competition displays certain trends. In this century, until about the late
there was a rise in the incidence of the insurance response but an even more
dramatic rise in public policy reliance on the socialisation of risk across an
increasing range of misfortunes. Parallel to this has come a general broadening of
the catchment of situations recognised by the courts as giving rise to tort
entitlements. In the past
years, however, concern has mounted in some quarters
that both the latter trends (socialisation of risk and tort expansion) have gone too
far and that such support for misfortune is now
over-developed that it stifles
initiative by fostering a dependency culture and infringes the autonomy of those
who are forced to finance these structures. The degree to which one shares this
concern, if at all, will depend on one’s politics. It is not a legal question. My aim in
this article is to emphasise that whether one thinks the existing catchment of tort
(or existing forms
social insurance and social welfare) should be reduced,
leaving individuals merely with the support they can afford from first party
insurance or hope to receive from charity, is profoundly a matter of ideology. The
reason this requires emphasis is that confusing tort with the other forms of support
for misfortune can lead, and has recently led in the United States, to the
presentation of these choices as apolitical and their resolution in favour of
retrenchment of tort as merely the working through of inexorable logic.
In this article I will deal with tort’s relationship with insurance. Concentrating
first on the common but vague claim that tort is somehow ‘about insurance,’ I will
argue that neither actual insurance nor insurability are or should be relevant to the
reach and shape of tort liability. I then hope to explain why continued confusion on
this point can lead to the conflation of tort with the insurance model of response to
misfortune. Once
‘tort as insurance’ construction
liability is embraced, the
normative agenda for the future of tort inexorably points to retrenchment: an
agenda, it can then be claimed, which arises from the mere logic of what tort is
*Fellow, Balliol College, Oxford.
later work
will deal with its relationship to systems of socialised risk.
Modern Law Review Limited
November). Published by Blackwell Publishers,
Cowley Road, Oxford
Main Street, Cambridge, MA
Insurance and Ideology
about and not from any ulterior ideological motive. Exploding the ideological
subtext of the ‘tort as insurance’ fallacy then frees us not only to formulate
coherently the central question of the future of tort (this is the question of which of
life’s misfortunes justify the full restorative response tort extracts from the
defendant), but also to admit the ideological nature of the analysis required for
resolution of this question.
Three forms of response to misfortune
Two of the important responses to misfortune require a pooling or
‘collectivisation’ of risk. The first is
Here risks are pooled by those
exposed to the same likelihood of risk of the relevant misfortune, be it of loss (first
party insurance) or legal liability (liability insurance). The selection
misfortunes are insured and at what level of cover are both choices for the insured
(save in areas of compulsory insurance). For example, a person taking out first
party accident insurance may choose only to cover the risk of income disruption
(and not the misfortune of disfigurement, pain and suffering, etc) and then only up
to a certain level of pre-accident salary. A characteristic of insurance is that it is a
closed system in the sense that the group of people who pay into the finance pool is
identical to the group of people who are entitled to claim from it: no one pays in
who is not also entitled to claim and it is only those who pay in who can claim. But
the most fundamental characteristic of insurance, the characteristic Abraham calls
‘the heart of any insurance system,’* is its pursuit of homogeneous risk pools:
that is, the aim of insurance is to categorise insureds into groups according to the
insured’s likelihood of suffering the relevant misfortune, and to require that each
insured pay risk-related premiums into the insurance pool corresponding to that
group. Thus, although mutual support is what underpins insurance, it is a mutual
support which only extends to and is defined in terms of support between like
insureds. Over the very long term (and ignoring the administrative costs and profit
of the insurer), each member of a truly homogeneous risk pool would pay in the
same as it pulled out. This not only means that no member would subsidise other
members, but that the ultimate moral logic of insurance is one of ‘insured pays’;
that is, in terms of the misfortune (be it loss or liability) for which the cover exists,
a logic of ‘victim pays.’ Finally, it should be noted that because the pool is
internally self-financed, the insurance arrangement itself carries with it no
potential for imposing financial incentives on outsiders whose behaviour affects
the likelihood of the misfortune occurring. In other words, deterrence of
misfortune cannot be accommodated as a direct goal of insurance: for example, in
first party insurance the creator of the misfortune does not pay!
The second response to misfortune which involves collectivisation of risk is
what I term
Here the selection of which misfortunes are to be
covered by the arrangement is a choice by the state, as
the level to which the
victim is financially supported and neither need be linked to the question of what
the victim would have chosen (and would have been able to afford) to insure
against. The key characteristic of these arrangements is that the victim of the
relevant misfortune is ensured of receiving financial support even though the pool
covers heterogeneous risks, even though the victim has not contributed risk-related
Distributing Risk: Insurance,
Public Policy
Haven: Yale University
Review Limited

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