Book Review: Liability: The Legal Revolution And Its Consequences by Peter W. Huber

When the solemn judgments of a nation’s legal system become the object of jokes and sarcasm, there has to be a serious problem. There may be plenty of discussion over the correctness or wisdom of Marbury v. Madison, the Legal Tender Cases, Lochner v. New York, or Brown v. The Board, but nobody has ever laughed at those decisions. But how about the case in which a contestant in a refrigerator-carrying race recovered against the manufacturer of the refrigerator for injury to his back; the case in which a church was sued by the family of a person who had committed suicide under the theory that the church had exacerbated the suicide victim’s feelings of guilt and depression; the case in which New York City was held liable for compensatory and punitive damages to the wife of a policeman who shot her and then himself, on the grounds that the city was reckless in requiting officers to carry guns off duty; or the case in which a bank was held liable to the widow of a guard who had been shot when another guard went berserk, for having failed to discover the guard’s mental defect? Cases like those cause sensible people to snicker and wonder what this country is coming to.

If you merely want a bandolier of ammunition to use in arguing that our legal system has gotten pretty silly, this book will be of great use. Each of the above cases is mentioned (with legal citations) along with dozens more of the same genre.

But if you want to understand how this lamentable situation of liability for almost any injury of any type whether you caused it or not came about, and what its detrimental effects are, this book is a must. It is an investigation into the intellectual history of the liability revolution, the goals and theories of the “Founders” of this revolution (as Huber refers to a group of legal theorists from the 1950s led by the late William Prosset, who taught law at Hastings College; John Wade, Professor of Law at Vanderbilt University; and California Supreme Court Justice Roger Traynor), the predictable ways in which the main players in our legal system—judges and lawyers—seized upon these theories and used them to further their own ends, and how the effects of the liability revolution are proving harmful to almost everyone. Peter Huber has written one of those rare and wonderful books that help the reader to see how the world really works.

The Founders’ principal belief was that if manufacturers were held strictly liable for any accident that befell a consumer of one of their goods, this soon would be reflected in higher prices and more efforts to design safe products. Consumers would, in effect, buy a no-fault insurance policy along with every item they bought, whether the seller wanted to provide this “insurance” or not. The expected result was more coverage for individuals (who were presumed to be too ignorant to purchase insurance on their own) and ever-safer products brought into the market.

Bringing about this revolution, which was never sanctioned by legislation, required destroying contract law between buyers and sellers. Often a sales contract allocated risk between the buyer and seller in a way that the Founders thought improper. The contract might, for example, disclaim the seller’s liability for various types of harm which could befall the consumer. As long as such disclaimers had legal standing, the dream of universal no-fault coverage for consumers could not be realized for the simple reason that producers would not voluntarily agree to it.

The Founders’ solution was simple and brazen—judges sympathetic to the cause merely declared that liability disclaimers were unenforceable. Contracts were no longer viewed as binding documents of mutual consent, but rather as flypaper that unconscionably trapped the helpless consumer. The straggles of manufacturers and insurers to keep their potential liability within bounds they were willing to accept were useless. Over a period of only some 20 years, the ancient law of contract between buyer and seller was demolished to make way for the Founders’ new world of limitless liability.

At the same time that contract law was under a slash and bum attack, tort law was undergoing a massive alteration as well. Having taken accidents out of the realm of contract, the Founders needed to expand tort law to make producers responsible for injuries under virtually all circumstances.

Under traditional tort law, the plaintiff had to demonstrate that the defendant had acted negligently, and that the plaintiff’s injury had been caused by that negligence. Furthermore, a number of strong defenses were available to the defendant, such as contributory negligence on the plaintiff’s part. This law just wouldn’t do.

The Founders therefore also had to rewrite tort law through judicial fiat, which they did. The concept of negligence was redefined to mean, roughly, producing anything that isn’t perfect.

Today, for example, if an automobile or a vaccine isn’t one hundred percent safe—d it can always be claimed that the producer could have done something to make the product safer the producer may be held liable in any case where a person is injured. The judgment may be for tens of millions of dollars, including vast sums of punitive damages.

It will do the company no good to argue that the plaintiff was almost entirely to blame for the misfortune. It will do no good to argue that the causal connection between the product and the injury was extremely tenuous or speculative. The company has money. It must pay.

Has the liability revolution brought about the changes anticipated by the Founders? Has the level of safety risen? Huber shows conclusively that it has not. In fact, he makes a convincing case that the revolution has actually decreased the overall level of safety.

For example, a new medicine might relieve a great amount of distress and save many lives, but losing even one lawsuit to someone who suffered an adverse reaction to the medicine would more than wipe out the producer’s entire profit on the item. So the new product isn’t sold in the United States.

Or suppose that a manufacturer of a consumer product tries to incorporate every imaginable design change that marginally enhances the safety of the product. The resulting product will be substantially more expensive than otherwise, and that factor may cause people to continue to use their old and far less safe model. Like so many grandiose plans for reforming and perfecting the world, this one backfired.

The real beneficiaries of the revolution in liability? Lawyers, of course. Quite a few of them have gotten rich by getting a “good” jury and winning an enormous judgment against some hapless company. Our present liability law shifts resources away from safety-promoting activities and into litigation. For all but a few big winners in the liability slot machine, this is a bad trade-off.

The solution to the mess created by the liability revolution, Huber argues, is a return to the law of contract. “Neocontract,” he calls it informed consent between buyer and seller as to how the risks inherent in a transaction will be allocated between them.

Revitalizing contract law would permit insurance to function once again in areas where insurers have retreated in the face of limitless potential liability. Insurance, Huber demonstrates, is far better than tort litigation as a means of compensating those who have been injured. Insurance works more quickly, fairly, and with much less overhead than does the tort liability system the Founders have saddled us with. Insurance also doesn’t discourage innovation and safety improvements as our current system does. But insurance cannot work in a legal environment in which the chief maxim is “Those who have money must pay as much as the jury says.”

In proposing a return to contract, Huber affirms another general principle familiar to readers of The Freeman. Not only do plans for perfecting society backfire, but the solution to the problems created by such plans is a return to individual freedom and responsibility. Many of our nation’s problems would disappear if public officials would just allow people to make their own choices, rather than playing nanny all the time.

If you fear that a book on the law is going to be a dull read, you need not fear this one. Peter Huber writes with more clarity and wit than I have ever encountered in a work on a legal topic. I wouldn’t have thought it possible for a book on law and economies to be so entertaining.

A couple of cavils, if I may. First, the book is not footnoted in the usual fashion with numbers in the text. Therefore, the reader doesn’t know whether a case or statement has been footnoted until he looks under the notes for that chapter at the end of the book. If, for example, you wanted the name and citation of the case in which a telephone booth manufacturer had to pay for injuries sustained by someone who was using the booth when a car driven by a drunk smashed into it, you would have to look under the notes for that chapter, only to find out that the information hasn’t been provided. The virtue of traditional footnoting is that if you don’t see a number, you know that the author is giving you no further information.

My second cavil is the way in which Huber alternates between the pronouns “his” and “her.” Apparently this style of writing is employed out of a desire to be “non-sexist.” But the idea that consistent use of the pronoun “he” is bad or wrong is just plain silly.

Enough caviling. Huber has performed a monumental public service in so clearly and thoroughly analyzing this unfortunate development in the law. Get this book, read it, and then talk about it with every thinking person you know. []