The Judgment Proof Problem

  title={The Judgment Proof Problem},
  author={Steven Shavell},
  journal={International Review of Law and Economics},
  • S. Shavell
  • Published 1 June 1986
  • Law, Economics
  • International Review of Law and Economics
On the Judgment Proof Problem
A party who causes harm to others and is found legally liable but cannot fully pay is said to be judgment proof. When the party who causes the harm is judgment proof, the incentives provided by the
On judgment proofness in the case of bilateral harm
This paper defies the widely held belief concerning the unambiguous superiority of negligence in settings of judgment proofness. We analyze a set-up with bilateral harm, bilateral care, and potential
Disappearing Defendants Versus Judgment-Proof Injurers
In this paper we analyse two ways in which liability can be reduced: caps (the judgment proof problem), and proportional reductions (the disappearing defendant problem). We show that these two
A note on judgment proofness and risk aversion
Shavell (Int Rev Law Econ 6:45–58, 1986) established that potentially judgment-proof injurers will take less care than injurers with sufficient funds in the case of strict liability. This note
The Robustness Case for Proportional Liability
Abstract In important areas like medical malpractice and environmental torts, injurers are potentially insolvent and courts may make errors in determining liability (e.g. due to hindsight bias). We
Litigation with Judgment Proof Defendants
We consider a model of litigation in which some defendants have insufficient assets to pay a judgment at trial. Because the defendant’s assets are not observable, this serves as a source of
Remedying Illegal Actions of Judgment Proof Injurers Via Contracts, Fines and Sanctions
This paper studies the impact of the judgment proof problem on the design of incentives to prevent illegal behavior when the principal delegates a risky production activity to the agent in the
Ambiguous Beliefs on Damages and Civil Liability Theories
This paper analyzes the meaning of comparing the economic performance of strict liability and negligence rule in a unilateral standard accident model under Knightian uncertainty. It focuses on the
Financial Assurance versus Liability as Solutions to the Judgment-Proof Problem
A firm is said to be judgment-proof if it can cause an accident and then skirt its environmental liabilities by pleading bankruptcy. Judgment-proofness is a public-policy problem because it saddles
Minimum Asset and Liability Insurance Requirements on Judgment-Proof Individuals When Harm Is Endogenous
Minimum asset requirements are an increasingly common form of regulation intended to motivate better decision making by individuals who participate in potentially harmful activities. Shavell (2005)


On Liability and Insurance
The question considered in this article is how liability rules and insurance affect incentives to reduce accident risks and the allocation of such risks. This question is examined when liability is
Limited Liability and the Corporation
Limited liability is a fundamental principle of corporate law. Yet liability has never been absolutely limited. Courts occasionally allow creditors to "pierce the corporate veil," which means that
Optimal insurance policy indemnity schedules
We focus on two commonly observed insurance policy provisions: upper limits on coverage and deductibles. We suggest that upper limits on coverage result from the effective limited liability obtained
The Economics of Vicarious Liability
Business principals frequently incur civil liability for the wrongs of their agents.1 If the wrong is not ordered, authorized, or encouraged by the principal, then his liability is "vicarious." '
An Economic Analysis of the Choice between Enterprise and Personal Liability for Accidents
Consider an individual acting on behalf of an enterprise such as a private business or a public agency. During the course of his duties, the individual may injure a third party who bears no
Externalities, Insurance, and Disability Analysis
Although the recent literature on externalities has done much to clarify the issues2, important problems in the analysis of externalities remain. This article attempts to deal with some of them. As
On Moral Hazard and Insurance
This paper focuses on the part of moral hazard when care is not observed by the insurer and the role of the insurer in this situation.
Automobile Accidents, Tort Law, Externalities, and Insurance: An Economist’s Critique
Preface – By Todd Litman This is a seminal article concerning traffic accident cost analysis and vehicle insurance pricing reform by Professor William Vickrey, winner of the 1996 Nobel Prize for
Optimal Statistical Decisions
Foreword.Preface.PART ONE. SURVEY OF PROBABILITY THEORY.Chapter 1. Introduction.Chapter 2. Experiments, Sample Spaces, and Probability.2.1 Experiments and Sample Spaces.2.2 Set Theory.2.3 Events and