Restricting or Eliminating Joint-and-Several Liability
For injuries caused by more than one party, the question arises of how much liability to assign to each party. Courts generally use one of two rules in answering that question (although other approaches can be imagined). Under joint-and-several liability, any one injurer or subset of injurers can be held responsible for paying all of the damages. That individual or group often has the right to seek reimbursement from the remaining injurers. Under several liability, by contrast, the court determines the relative contribution of each injurer in causing the harm and holds each one responsible for only that proportion of the damages. In the past 20 years, many states have either eliminated joint-and-several liability under some or all circumstances or have restricted it in various ways—for example, by limiting it to certain types of damages or to injurers whose liability exceeds a certain percentage threshold.
Whether such changes have increased or decreased efficiency is not clear. Ideal incentives require joint injurers to each face liability equal to the incremental effect of their own actions, but neither joint-and-several nor several liability reliably achieves that result. To illustrate, consider a case in which the actions of two injurers are both necessary to cause harm—for example, in which each one disposes of a chemical and the two chemicals then combine to produce an explosion. Avoiding the explosion is efficient if either party could do so at a cost lower than the cost of the resulting damage. But neither injurer might take care if it expected to share liability evenly under either joint-and-several or several liability and its prevention costs exceeded 50 percent of the damage.11
What is clear is that several liability has two disadvantages for plaintiffs—and conversely, two advantages for defendants—relative to joint-and-several liability. First, it makes plaintiffs bear a higher share of the transaction costs. Instead of pursuing only a selected subset of the alleged injurers (often just the single party with the deepest pockets) and shifting the costs of dealing with the remaining parties to that selected group, plaintiffs must sue everyone from whom they hope to collect damages. Second, if some of the injurers are bankrupt, defunct, or otherwise unable to pay their share of the damages, several liability leaves plaintiffs partially uncompensated, whereas joint-and-several liability compensates them more fully, to the extent that other, deeper-pocketed injurers can be tapped for their fellow injurers’ shares.
11. In that case, strict liability could provide efficient incentives if each party faced potential liability for 100 percent of the damages, rather than 100 percent for both parties combined. Negligence standards could also provide efficient incentives here; as discussed above, however, such standards are not fully efficient in general because they do not provide appropriate incentives for the scale of nonnegligent activities. See Thomas J. Miceli and Kathleen Segerson, “Joint Liability in Torts: Marginal and Infra-Marginal Efficiency,” International Review of Law and Economics, vol. 11, no. 3 (December 1991), pp. 235-249.