October 4, 2022

Doctrine of Loss spreading in Tort Law

This approach suggests that a proper function of tort law should be not so much the shifting as the distribution of losses typically involved in modern living. Acceptance of this view point must inevitably change evaluations of what is a fair allocation of risks.

We have seen that no social value attaches to the mere shifting of loss so long as its effect is merely to impoverish one individual for the benefit of another. In order to warrant such a result, the law had to find a compelling reason for subordinating the defendant’s interest to the plaintiffs’ and inevitably focussed attention on the culpability of the individual participants in the accident.

On the other hand, if a certain type of loss is looked upon as the more or less inevitable by-product of a desirable but dangerous activity, it may well be just to distribute its costs among all who benefit from that activity, although it would be unfair to impose it upon each or any one of those individuals who happened to be the faultless instruments causing it. Such a basis for administering losses has been variously described as ” collectivization of losses” or ” loss distribution”.

It leads to the selection of defendants, not necessarily because they happen to be morally blameworthy, but because they represent a conduit for ” internalizing” the accidents cost to the risk creating activity and distributing it among its beneficiaries through higher prices and/or liability insurance.