1 For a history of the emergence of comparative negligence standards see Cooter, Robert & Ulen, Thomas, “An Economic Case for Comparative Negligence,” 61 N.Y.U.L. Rev. 1067 (1986). They report that as of 1986 all but six states plus Washington, D.C., had switched to a comparative negligence standard. These changes are recent. Most states enacted statutes or adopted the principle judicially in the 1970s and early 1980s. The three forms of comparative negligence are described in the text accompanying notes 5–7.Google Scholar

2 In Alvis v. Ribar. 421 N.E. 2d 886 (Ill. 1981). the court discussed the issue of increased litigation: “Opponents of the ‘pure’ form of comparative negligence claim that the ‘modified’ form is superior in that it will increase the likelihood of settlement and will keep down insurance costs. However, studies done comparing the effects of the ‘pure’ versus the ‘modified’ forms show the differences in insurance rates to be inconsequential.” Id at 897. The Alvis court also noted: Fears as to the likelihood of settlement are not supported in fact or logic. It was argued that the negligent plaintiff will refuse to settle knowing that, under the “pure” system he will be able to recover “something” in court. The converse can easily apply: the defendant may be encouraged to settle knowing that he cannot rely on the “modified” 50% cut-off point to relieve him of liability. A comparison of results under both the “pure” and “modified” forms showed that in Arkansas there was only a slight decrease in number of settlements when the state changed from “pure” to “modified.” 421 N.E. 2d 856, 897 (citing Rosenberg, “Comparative Negligence in Arkansas: A ‘Before and After’ Survey,” 13 Ark L. Rev. 89 (1959)). Also see Posner, Richard, The Economic Analysis of law, 2d ed. (Boston: Little, Brown & Co., 1977) (“Posner, Economic Analysis”). Posner notes that comparative negligence may increase the probability of litigation, since use of the comparative standard makes it more difficult to predict outcomes.Google Scholar

3 A large number of published studies of comparative negligence focus on whether the standard produces efficient caretaking incentives. These include Cooter & Ulen, 61 N.Y.U.L Rev.; D. Haddock & C. Curran, “An Economic Theory of Comparative Negligence,” 14 J. Legal Stud. 49 (1980); M. White, “An Empirical Test of the Comparative and Contributory Negligence Rules in Accident Law,” 20 Rand J. Eon. 308 (1989); G. Schwartz, “Contributory and Comparative Negligence: A Reappraisal.” 87 Yale L. J. 697 (1978); S. Rea, Jr., “The Economics of Comparative Negligence,” 7 Int'l Rev. L & Econ. 149 (1987); Daniel Rubinfeld, “The Efficiency of Comparative Negligence,” 16 J. Legal Stud 375 (1987).Google Scholar

4 See White, 20 Rand J. Econ. Her results (based on a sample of litigated rear-end collisions) indicate that differences between the rules of contributory negligence and comparative negligence are less dramatic in practice than in theory. While empirically it appears the contributory negligence rule provides stronger incentives to exercise care, care variables are not significantly related to accident damages. Furthermore, the evidence is statistically weak concerning whether the comparative negligence rule provides inefficient levels of care.Google Scholar

5 According to Cooter & Ulen, 61 N.Y.U.L Rev., the pure form has been adopted in 7 of the 44 states that have adopted some form of comparative negligence: Arizona (Ariz. Rev. Stat. Ann. &Sect 12–2503 to 12–2509 (Supp. 1986)); Iowa (Iowa Code Ann. § 668 (West Supp. 1986)); Louisiana (La. Civ. Code Ann. art. 2323 (West Supp. 1987)); Mississippi (Miss. Code Ann. § 11–7–15 (1972)); New York (N.Y. Civ. Prov. L.R. § 1411 (McKinney 1976)); Rhode Island (R.I. Gen. Laws § 9–20–4 (1985)); and Washington (Wash. Rev. Code Ann. § 4.22.005 (Supp. 1987)).Google Scholar

6 The 50% rule has been adopted in the following states: Arkansas (Ark. Stat. Ann. § 27–1763 to 27–1765 (1979)); Colorado (Colo. Rev. Stat. § 13–21–111 (Supp. 1986)); Idaho (Idaho Code § 6–801 to 6–806 (1979)); Kansas (Kan. Stat. Ann. § 60–258a (1984)); Maine (Me. Rev. Stat. Ann. tit. 14, §156 (1980)); North Dakota (N.D. Cent. Code § 9–10–07 (1975)); and Utah (Utah Code Ann. § 78–27–38 (Supp. 1986)).Google Scholar

7 Under this form, the contributory negligence rule takes effect as in the 50% rule but does so at 50.001% as opposed to the even split. Again, many fail to see the rationale for drawing the line at different percentages. The 50% plus rule has been adopted in these states: Connecticut (Conn. Gen. Stat. Ann. § 52–572(h) (West 1989)); Delaware (Del. Code Ann. tit. 10, § 8132 (Supp. 1988)); Hawaii (Haw. Rev. Stat. § 663–31 (1985)); Indiana (Ind. Code Ann. § 34–4–33–4 (Burns 1986)); Massachusetts (Mass. Gen. Laws Ann. ch. 231, § 85 (West 1985)); Minnesota (Minn. Stat. Ann. § 604.01 (West Supp. 1988)); Montana (Mont. Code Ann. § 27–1–702 (1987)); Nevada (Nev. Rev. Stat. § 41–141 (1987)); New Hampshire (N.H. Rev. Stat. Ann. § 507:7(d) (Supp. 1988)); New Jersey (N.J. Stat. Ann. § 2A:15–5.1 (West Supp. 1989)); Ohio (Ohio Rev. Code Ann. § 2315.19 (Anderson 1988)); Oklahoma (Okla. Stat. Ann. tit. 23, § 13 (West 1987)); Oregon (Or. Rev. Stat. § 18.470 (1987)); Pennsylvania (Pa. Cons. Stat. Ann. § 7102 (Purdon Supp. 1989)); Texas (Tex. Civ. Prac. & Rem. Code Ann. § 33.001 (Vernon Supp. 1989)); Vermont (Vt. Stat. Ann. tit. 12, § 1036 (1985)); Wisconsin (Wis. Stat. Ann. § 895.045 (West 1983)); and Wyoming (Wyo. Stat. § 1–1–109 (Supp. 1988)).Google Scholar

8 The slight-gross rule is used in only Nebraska (Neb. Rev. Stat. § 25–21, 185 (1985)) and South Dakota (S.D. Codified Laws Ann. § 20–9–2 (1987)). The South Dakota version only requires the plaintiff to establish that his negligence was slight: “In all actions brought to recover damages for injuries to a person or to his property caused by the negligence of another, the fact that the plaintiff may have been guilty of contributory negligence shall not bar a recovery when the contributory negligence of the plaintiff was slight in comparison with the negligence of the defendant, but in such case, the damages shall be reduced in proportion to the amount of plaintiff's contributory negligence.”Id. Google Scholar

9 This proposition holds true provided the plaintiff's damages equal or exceed the defendant's. A negligent plaintiff may find herself worse off under comparative negligence if the defendant's injuries are very large relative to her own since she may, on net, owe money to a defendant who is less negligent than the plaintiff. Under contributory negligence, the negligent plaintiff will not, under any conditions, owe any money to a negligent defendant. On average, however, one would expect damages to plaintiffs and defendants to be approximately equal, so the general ranking in the text is expected to prevail.Google Scholar

10 In their review article, Robert Cooter & Daniel Rubinfeld, “Economic Analysis of Legal Disputes and their Resolution,” 27 J. Econ. Lit. 1067 (1989), provide a hybrid model of suit, settlement, and trial based on models developed by, among others, William Landes, “An Economic Analysis of the Courts,” 14 J. Law Econ. 61 (1971); Richard Posner, “An Economic Approach to Legal Procedure and Judicial Administration,” 2 J. Legal Stud. 399 (1973); and Steven Shavell, “Suit, Settlement, and Trial: A Theoretical Analysis under Alternative Methods for the Allocation of Legal Costs,” 11 J. Legal Stud. 55 (1982).Google Scholar

11 For theories of settlement that include models of the negotiation process, see Cooter, Robert, S. Marks, & Robert Mncokin, “Bargaining in the Shadow of the Law: A Testable Model of Strategic Behavior,” 11 J. Legal Stud 225 (1982); 1. P'ng, “Strategic Behavior in Suit, Settlement, and Trial,” 14 Bell J. Econ. 539 (1983); and J. Reinganun & L. Wilde, “Settlement, Litigation and the Allocation of Litigation Costs” 17 Rand J. Econ. 1067 (1986).Google Scholar

12 An option is a contract allowing the other party to buy or sell an asset within a given time period at an agreed price. It represents a type of speculation since if the price changes significantly, a buyer may well be buying at an agreed price that is well below current trading price. A lawsuit can be interpreted as an option since the potential outcome in the form of a favorable verdict may be very large relative to the price of a lawsuit. Furthermore, once a suit is underway, the plaintiff has a variety of options. She can choose whether to proceed quickly, to invest in discovery, and whether to make a settlement offer. These options make a lawsuit more valuable than if the plaintiff had to choose initially between trying the case and not filing a suit. See Cornell, B., “The Incentive to Sue: An Option-pricing Approach,” 19 J. Legal Stud 173 (1990).Google Scholar

L. Bebchuck makes a related argument in “Suing Solely to Extract a Settlement Offer” 17 J. legal Stud. 404 (1988). He says that potential plaintiffs may recognize that the expected value of going to trial is negative but this may not deter the plaintiff from suing: The plaintiff sues to extract a settlement offer from the defendant and plans to drop the case if such an offer is not received.CrossRefGoogle Scholar

13 See Cooter & Ulen, 61 N.Y.U.L. Rev. at 1086, who also raise the issue of evidentiary uncertainty. In reality, the level of care that a “reasonable” person would take is a vague standard. Moreover, courts decide cases based on the preponderance of evidence, which is substantially less than full information. For example, the court may have limited information about the precautionary technology of the parties. Individuals, therefore, cannot predict with complete accuracy whether a court will conclude that a given level of precaution constitutes “due care.” Instead, parties operate under conditions of evidentiary uncertainty.Google Scholar

14 Many scholars studying comparative negligence have called for empirical work to determine which effect will dominate. See, e.g., Rubinfeld, J. Legal Stud at 393–94 (cited in note 3), and D. Orr, “The Superiority of Comparative Negligence: Another Vote,” 20 J. legal Stud 119, 128–29 (1991).Google Scholar

15 Posner, Economic Analysis (cited in note 2), has argued that even if incentives to exercise due care are efficient, comparative negligence is less desirable in that it adds a new dimension to the determination of fault and makes litigation more costly. Posner also notes that comparative negligence may increase the probability of litigation since use of the comparative standard makes it more difficult to predict outcomes.Google Scholar

16 This problem with case disposition data is the focus of a growing literature stemming from the work of G. Priest & B. Klein, “The Selection of Disputes for Litigation,” 13 J. Legal Stud 1 (1984). For references to more technical models complementing and building on this work See Eisenberg, T., “Litigation Models and Trial Outcomes in Civil Rights and Prisoner Cases,” 77 Geo. L. J. 1567 (1989). See also D. Whitman, “Is the Selection of Cases for Trial Biased?” 14 J. Legal Stud 185 (1985); J. Hughes & E. Snyder, “Policy Analysis of Medical Malpractice Reforms: What Can We Learn from Claims Data?” 7 J. Bus. & Econ. Stat. 423 (1989); L. Stanley & D. Coursey, “Empirical Evidence on the Selection Hypothesis and the Decision to Litigate or Settle,” 19 J. Legal Stud 145 (1990); T. Eisenberg, “Testing the Selection Effect: A New Theoretical Framework with Empirical Tests,” 19 J. Legal Stud. 337 (1990).Google Scholar

17 The study, performed by the All-Industry Research Advisory Committee (AIRAC), is entitled Automobile Injuries and Their Compensation in the United States (Chicago: AIRAC, 1979) (“AIRAC”).Google Scholar

18 For a discussion of a similar problem in a different context, see D. Haas-Wilson, “The Effect of Commercial Practice Restrictions: The Case of Optometry,”29 J.L & Econ. 165 (1986). She points out that it is the entire spectrum of regulations that affects whether a state is accurately classified as “restrictive” versus “nonrestrictive” in terms of advertising policy. In the context of our article the analogous concern is that we may attribute litigation effects to the state's negligence rule, whereas the effects may be attributed to other aspects of tort policy such as limitations on contingency fees and award amounts. To the extent that these other measures were adopted jointly with comparative negligence, the results represent combined effects.CrossRefGoogle Scholar

19 Further, the within-group variances of demographic variables do not differ significantly across the categories of states grouped by negligence rule. In addition, only Alaska and Mississippi have values of the statewide characteristics that differ significantly from the mean and these states provide few data points in our sample.Google Scholar

20 White, 20 Rand J. Econ. (cited in note 4).Google Scholar

21 The award amount is the dollar amount reported by the insurance company as paid to the claimant. If an attorney is involved, we adjust this amount downward to reflect average attorney fees (35.5% of award). The claim amount may understate total compensation to the extent an individual collects from more than one auto insurance company or from health insurance coverage. However, while dollar amounts may be understated, this measurement problem is not expected to be systematically related to the state's negligence rule; hence, interpretations regarding relative magnitudes of award amounts are unaffected.Google Scholar

22 See Tullock, “Trials on Trial: The Pure Theory of Legal Procedure,” in Göran & J. Malthias Graf von der Schulenberg, eds., Law and Economics and the Economics of Legal Regulation 39 (Boston: Kluwer Academic Publishers, 1986), and Cooter et al., 17 Rand J. Econ. (cited in note 11).Google Scholar

23 The 35.5% figure is the one used by AIRAC (cited in note 17).Google Scholar

24 For an alternative explanation of the motivation for the shift toward comparative negligence See Curran, C., “The Spread of the Comparative Negligence Rule through the United States” (Department of Economics, Emory University, 1989). Curran argues that adoption of product liability rules affects the spread of comparative negligence. “By radically changing the interests of manufacturers, the adoption of products liability law enabled the lawyers to successfully push for the adoption of a tort law which clearly benefits their interests.” He also states (at 24), “Because so many of the states adopting the pure form of comparative negligence did so through court decisions, one cannot help but suspect there is a relationship between the methods of adoption and the form of the rule adopted.” Clearly, additional analysis is needed to ascertain the nature of such a relationship.Google Scholar