The Case of the Disappearing Defendant: An Economic Analysis

Abstract

Imagine an injurer harms a victim.If the injurer is solvent and the victim can hale her into court, the victim may receive compensation for damages.If the injurer is insolvent, or it is too costly for the victim to bring an action against the injurer, then from the perspective of the victim, the injurer has disappeared-the victim will receive no compensation.The effect of an injurer's potential disappearance on her incentive to take care to avoid accidents is more subtle.One might think that the more a potential injurer believes that future liability will be avoided, the less care she would take to avoid accidents.A close analysis, however, reveals that the amount of care an injurer will take depends critically on whether she faces a negligence or strict liability rule and what kind of scheme the courts devise for spreading the risk of the injurer's disappearance among other potential injurers.'This Comment employs an economic analysis of the problem of the disappearing defendant.The analysis evaluates the relative efficiency 2 of a number of liability rules governing a variety of different types of accidents assuming that a potential injurer realizes that the victim may never recover damages.The analysis is useful in providing a framework for evaluating the courts's and commentators' 4 attempts to I See infra note 18 and accompanying text.' One liability rule is relatively more efficient than another if it is Pareto-superior, i.e., under some circumstances it provides better incentives for potential tortfeasors to take efficient amounts of care, see infra note 18 and accompanying text, and it never provides worse incentives.3 See, e.g.

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