I have a question about liability insurance and libertarian philosophy/economics. For example say farmer John earns a living selling chicken eggs off his 30 acre ranch out in the country. Some rich individuals decide to move in the neighborhood and drive $500,000.00 cars.
Farmer John only makes 25k a year. His car is only worth 2k. How much insurance should he be forced to have.
The heart of the question is if some people are excessive and extravagant in their purchases does that not force others, particularly those in the lower classes off the road because they can not afford the insurance to cover against excessive liability. Is it a legitimate roll of government to limit liability on things like vehicle damage?
I’m an insurance broker, so I might be a little biased in that regard, but I’d be interested in seeing what others say or have said on the topic of what role, if any, the government should have in such situations.
But actually, I think the expensive vehicles might be the least of his worries. What if some little kid ran out in front of him and was severely injured or killed. He could easily be sued for $1 million or more. If he had a tire blow out and went up into a row of new Harleys at a local dealership he might have a pretty big bill as well. Worse yet, what if that blowout caused him to go up on the sidewalk and wipe out a bunch of people at the town festival?
The bad thing about liability insurance is that there is no upper limit. Anyone can sue anyone else for just about anything at any time. Sometimes they’re legitimate and sometimes those lawsuits are outrageously bogus. Unfortunately, sometimes even the quite bogus lawsuits win out.
It is interesting to me. I know the government offers limmited liabilty for investors, but I am undecided about a things such as tort reform. Does government have a roll to play in setting a price on life and injury? I do not think so at least not in private contracts.
I think on public property like roads a strong case can be made to limit accident liability (accidents that are accidents, not including intoxication or recklessness) when the damage is property and not bodily. In my opinion there comes a point that if some one chooses to drive something so expensive on public property they themselves must share in some responsibility.
Just something I have been thinking about for the last few months. I would love be schooled on this: I am sure I missing some obvious points.
I am very interested in liability insurance, and I actually work where I do (government) only to be able to move to such a field in a couple of years.
I can’t say how does the government think about the situation you highlighted, but I have an impression that Third Party Motor Liability policies are required by law only up to a certain limit. If the damage done overtakes that limit, I believe that the thing goes to court, or something like that. At least where I live that’s the idea.
If I myself was a liability insurer, and the damage done by my client outstripped the limit of my policy, of course I’d pay up to the limit, BUT I’d follow the case in court and if the court awarded damages greater that what I’d consider fair (considering that a part has been paid by me), I’d offer my (former) client defense for free, and I’d get that decision down. People got to know that Company X looks after its clients.
Finally, I trust that an anarchic commonwealth would learn to spare such trouble by having road owners post sighs reading:
“By entering this property I agree to forfeit any claim to damages that might here be inflicted to my property, from 7000 grams of gold upwards.” Of course, special roads (in places like , would have no such limit and require those who enter to have liability insurance of much higher limits).
I was just thinking about mandated liability insurance recently, and the libertarian perspective.
Part of me wonders if we would really see much of a change in terms of the general population purchasing liability insurance or not if it were no longer mandated. Accidents happen a lot, especially traffic accidents. And even minor car repairs alone can run up a pretty hefty tab. I can’t be sure, but I’d speculate a majority of people would probably end up retaining their liability insurance… though I also suppose location would be a factor too. People in urban areas with high volumes of traffic would probably be more interested in retaining liability insurance as opposed to people in rural areas with low volumes of traffic.
On another note, the parallel of mandated liability insurance and prohibition of cannabis, for instance, might also be worth noting. Mandated liability insurance basically says you can’t drive a car unless you buy liability insurance–thereby prohibiting driving a car that you don’t have insurance for. Cannabis is completely prohibited. Yet in both cases the prohibition doesn’t prevent what the law would deem undesirable. Cannabis is still widely manufactured, bought, sold and used just as people still regularly drive without liability insurance, if only temporarily.
In any case, it’s fundamentally difficult for me to support mandated liability insurance because of the way it violates natural rights. Coercing someone to purchase something by threat of force is immoral. Yet, I do recognize that there may be some unintended consequences from retracting that mandate, then again, there these may not necessarily be negative consequences. Isn’t it feasible that in the absence of such a mandate, assuming many people stopped acquiring liability insurance afterward, people might also drive more cautiously or even less frequently, thereby minimizing the number of such accidents?
Didn’t we see the same type of thing with seat belt laws? I believe I remember reading/hearing (it might have been Woods, I can’t recall) talking about how incidents of auto accidents increased as a result of seat belt laws, but the percentage of injuries/deaths remained more or less the same, basically because people began driving more carelessly because they felt safer due to having to wear their seat belts all the time.
So I’m not sure I’ve necessarily arrived at a conclusion about this topic in particular, though I’d be interested to hear arguments on both sides of the fence.
So true. Molineoux did a piece on something like this.
I can’t seem to find it but here’s the idea: a small town in , I believe, was witnessing such distressing volumes of traffic, that somehow they though that removing all road signs, semaphores, lanes, etc, could help. Not only did it help, and traffic flowed much faster, but accident rates where also reduced, because when you know that a pedestrian can cross at any moment, you pay attention to the road (I know this from my own country’s experience).
I believe that if entrepreneurs would be left free, to operate roads, urban roads would sport no signs whatsoever, with highways continuing as they are. I think that would be most efficient. And of, course, liability insurance rates would be lower in such roads as accident rates would likewise be lower.
As for mandatory liability insurance, it must go and go now, it doesn’t matter if it harms or benefits us in the short run.
Out here in Ca I understand 53% of drivers do not carry insurance and it is mandated.
I am thinking that maybe it would be more efficient to carry collision insurance than liability. I think that would lead to over all safer driving. Liability just seems to be the opposite of insurance because you pay over the damage covered by liability.
If someone decides to drive around a $500,000 car, it is his responsibility to make sure it is insured, not the responsibility of everyone else. If Farmer John accidentally hits his $500k car, it is an accident, and as such, Farmer John’s liability should be at most $1000 (the deductible that the other guy should be carrying). If the other guy chose not to carry full coverage insurance, well that is his own damn fault.
It doesn’t work that way. Someone not having insurance doesn’t excuse you to destroy their stuff.
It sure makes sense to insure your expensive car though. If John is penniless, and we’ll suppose he is old and has not much future potential income, the rich guy is faced with near total loss.
I would imagine some amount of insurance would be required in most contractual matters, as is routinely the case in the building trade, etc. If I were a road owner, I would require min limits to make use of my road more marketable.
Who are you to proclaim what is extravagant, as if this excuses a poorer person to rob/damage my stuff? You are in essence saying that it is a crime to not carry insurance. (Remind anyone of the US health care bill?)
A true (no fault) accident is a kid running in front of your car and getting hit (we assume there is no reason to find fault with the driver, but that isn’t always the case). A tire popping causing you to hit a row of Harleys, would still leave you owing a row of Harleys +other applicable costs. Then if you decided to mow down the row of Harleys on purpose, you would owe the bikes twice over +likely even greater expenses.
Read from page 12 of this PDF for a better explanation of the basics.
I disagree with the bolded part in particular. An “accident” can be caused by any variety of factors. Under US common law*, derived from English common law, Farmer John would typically be liable for any “negligence”, loosely defined as one of either:
Doing something a reasonable person would not have done and which was the proximate cause of the accident.
Failing to do something that a reasonable person would have done which would have avoided the accident.
In an “accident” situation an example of #1 might be something like bending over to pick up a cassette off the floor and swerving into the wrong lane. An example of the second case might be someone failing to look both ways before pulling into traffic.
I personally don’t see why it should be the responsibility of the Mercedes owner to be set to pay for the negligence of Farmer John. It seems only fair to me that Farmer John pick up the tab for any damages caused by his own negligence. The value of the car shouldn’t really play all that much into things. $500,000 is certainly out of the ordinary, but what if Farmer John didn’t quite put his transmission into park nor set his parking brake while on the hill in his driveway and his truck rolled down the hill and into his neighbor’s house? or worse yet, killed his neighbor’s daughter playing in her front yard?
Should it just be his neighbor’s responsibility to carry enough health insurance, life insurance, disability insurance and property insurance to be able to pay for whatever negligence Farmer John or any other neighbors or passersby might commit? Or maybe he should just eat any such loss and say “Such is life.”?
I know some of the reasons advanced for having no-fault laws and everyone just picks up their own tab for any losses, and some of them are pretty strong ones, but it goes against my grain and I would prefer to correct some of the abuses and perhaps look at other types of reforms first.
*So called “No-Fault” states have modified the negligence laws to some extent, but most are hybrids and do still allow lawsuits above some threshhold or in some circumstances.
I never said it excuses people to rob other people. Stop asserting what I never said. And I never said it just excuses a poor person. It excuses everyone. Your stupidity for not insuring your property and for buying expensive stuff is not my problem. Do you get just as upset when a tree falls on your house? It is no different if my tire blows while driving and I accidentally run into your car. In both cases it was an accident, a force of nature.
Really? I am saying that I can sue someone for not carrying insurance? Where?
Again, their stupidity for not purchasing insurance against accidents (which can be a tree falling on the Harley’s or someone accidentally driving into them) is not my fault.
It seems only fair to me that an accident be considered an accident, and nothing more. Shit happens.
And that changes the fact that it was an accident how?
Again, I think there is a small amount of liability for accidents. Otherwise, it is up to the property owner to cover his own losses. What would you do if a tree fell on your house? Take it to court?
Read what you originally wrote. I forget the strict legal terms for this stuff offhand (and am about to leave for an extravagant weekend vacation).
An “accident” wouldn’t invoke liability. You spoke of John being liable for some amount $1K. You ought to choose what these words mean and the exact situation for your hypo.
It’s an accident when your kids hit a ball through your neighbor’s picture window, but would you tell him not to worry about it because “It was an accident.”?
Negligence by definition means someone did something wrong that caused damage. Why should I have to pay for damage caused by someone else’s negligence?
It doesn’t, and that’s my point. In the above case Farmer John was negligent and killed someone’s daughter. Do you really think it’s right to just write her off and say, “Oh well, shit happens”?
The way it works in our state is that it all depends on that law of negligence. If the tree was dead and the limbs were rotten and a neighbor had warned them that it was dangerous and should be cut down, then yes, the owner of the property with the tree is negligent and responsible for any damages that tree causes if it falls. I’ve seen any number of cases like that, and I personally think it is the right and responsible way to handle things. If, on the other hand, a lightning bolt took that tree down or super high winds, and the tree was healthy it is considered “An act of God”. There is no negligence involved and everyone pays their own damages. That too seems fair to me. It can still cause hard feelings among neighbors, but in general I think it is fair.
From my standpoint the law of negligence is a fair one and passes the common sense test. How it is applied by some juries, however, can be another matter. But that’s an issue of people’s judgment rather than of a problem with “the system itself” in my opinion.
No, I think there would be cause for a dispute. As an arbitrator I would probably rule that the kid and/or his parents need to replace the window.
Because it was an accident. Motive is very relevant to dispute resolution. Let’s say I shoot and kill you. But the reason I did it was that you were sexually assaulting a woman. Do you think that would mitigate the punishment for me shooting you? Do you think that pretty much absolves me of any compensation for killing you? If so, it is pretty much the same thing if I drop my gun and kill you. It was an accident. Again, would you sue a tree for falling on your house? I mean, it was negligent. The point is that the fact that humans are intelligent does not mean that we are infallible.
“Write her off”? What are you talking about? She is dead. Do you mean write off the dispute? As an arbitrator, yes. It was an accident.
I am not talking about if someone was warned. I am talking about a pure accident. Like you say, lightning striking the tree. Me forgetting to put on my parking brake is purely accidental. You can’t hold me very responsible for what nature gave me, absent-mindedness. Nor can you hold me responsible for your girl being in the wrong spot at the wrong time. Purely accidental.
It is a problem with the system. We are not allowed to use private courts to resolve differences.