The Future of Liability – Fault or No Fault Liability

Historically the early tort law was mostly fault-based and if no fault was proved, the victim was not entitled to compensation. Slowly this changed to a welfarist or social insurance model, with the aim to compensate accident victims. This social insurance model can be seen in when the burden of proof in cases of manufacturers and medical negligence is relaxed and permitting vicarious liability of employers and car owners. Human failures in a machine age are many and fairly regular. The victims of these accidents can ill afford the loss they entail. There is a conviction that tort law must deal with all these losses. Thus the principle that “for every wrong there must be redress in the form of damage” has changed to “for every injury there must be redress in the form of damage.” The best way to do this is to assure accident victims of compensation, and to distribute the losses over society as a whole or some segment of it.

No fault liability, also known as strict liability, is intended to discourage reckless behaviour and needless loss by making potential wrongdoers take all possible precaution and abide by the accepted safety norms. No Fault Liability also helps to simplify and expedite court decisions.

Thus modern "tort" law looks at the social diffusion of losses created by risky but beneficial activity and the attainment of an economically efficient level of accident avoidance. The innovation that reflects this revolution is liability without fault. The point of this is to shift the burden of losses from the victims onto firms that can insure against civil liability and spread the cost thinly (through the price of their products) over the mass of consumers who use their products. In addition, this absorption of accident costs to the activities that generate them will, it was thought, encourage companies to find cost-justified ways of making their products safer.

No-fault insurance was first proposed in the early 1930s. In the 1950s and ‘60s in the US, a rising number of car-accident lawsuits, increased medical costs, and hiked-up liability insurance rates. This led to a public outcry for a no-fault system. ?In the 1970s many automobiles no-fault schemes were introduced in the United States, Canada and Australia. During the 1980s no-fault schemes were proposed covering products and medical malpractice accidents. No-fault coverage cost less than liability policies and further, it was faster and more convenient.

The basis of a no-fault scheme is rooted in the principle of distributive justice, compensating victims without having to establish causation and fault. The standard fault-liability law for negligent actions involves fault considerations based on legal theoretical concepts determined through judicial precedent, which are as per the legal principles of duty of care, proximity and negligence.

One of earliest cases of strict liability was the famous 1868 English case Rylands v. Fletcher case. In 1860, John Rylands paid contractors to build a reservoir on his land, intending that it should supply the Ainsworth Mill with water. Rylands contracted the work out to a competent engineer. While building it, the contractors discovered a series of old coal shafts and passages under the land filled loosely with soil and debris, which joined up with Thomas Fletcher's adjoining mine. Rather than blocking these old shafts up, the contractors left them as it is. On 11 December 1860, shortly after being filled for the first time, Rylands’s reservoir burst and flooded Fletcher's mine causing ￡937 worth of damage. Fletcher pumped the water out, but on 17 April 1861 his pump burst, and the mine again began to flood. At this point a mines inspector was brought in, and the sunken coal shafts were discovered. Fletcher brought a claim against Rylands.?

In appeal to the Court of Exchequer Chamber, the Court, the verdict went in favour of Fletcher. Despite the absence of proof of negligence on the part of Rylands, he was held liable according to Blackburn J's classic principle: “We think that the true rule of law is, that a person who for his own purposes brings on his lands and collects and keeps there anything likely to do mischief if it escapes, must keep it in at his peril, and, if he does not do so, is prima facie answerable for all the damage which is the natural consequence of its escape…” The matter was appealed in the House of Lords and Fletcher was again successful. The House of Lords aptly observed: “If a person brings or accumulates on his land anything which, if it should escape may cause damage to his neighbours he does so at his peril. If it does escape and cause damage, he is responsible, however, careful he may have been, and whatever precaution he may have to prevent the damage”.

Strict Liability in India

A more stringent rule of strict liability than the rule in Rylands v. Fletcher was laid by the Supreme Court in the case of M.C. Mehta v. Union of India (1986). ?The court held that the rule of Rylands v. Fletcher which evolved in 19th century did not fully meet the needs of modern industrial society with highly developed scientific knowledge and technology were hazardous or inherently dangerous industries were necessary to be carried out on as a part of the development programme and that it was necessary to lay down a new rule not yet recognized by the English law, to adequately deal with the problems arising in a highly industrialized economy.

The case M.C. Mehta v. Union of India originated in the aftermath of oleum gas leak from Shriram Food and Fertilizers Ltd. complex at Delhi. This gas leak occurred soon after the infamous Bhopal gas leak and created a lot of panic in Delhi. One person died in the incident and few were hospitalized. The case laid down the principle of absolute liability and the concept of deep pocket. Through this case the Supreme Court of India evolved a new principle of liability to deal with cases where the industry being carried out was of a hazardous and inherently dangerous nature. The new principle of law did not incorporate the exceptions provided under the Rylands v. Fletcher rule, nor was it necessary to establish the requirements of non-natural use of land, the ‘escape’ of thing, etc., which had rendered the rule of strict liability useless in the modern era of rapid economic development. The new rule, coined by the then Chief Justice of India, PN Bhagwati, was called “Absolute Liability”.

Criticism against the Fault Liability Principle

People have criticised the Fault Principle as not a moral principle because a defendant may be negligent without being morally culpable and vice versa. If the focus of the fault principle was to punish the offending party, then there should not be vicarious liability, and even liability insurance, which allow the wrongdoer to escape paying the victim's compensation. The Fault Principle also do not pay attention to the conduct or needs of the claimant. If no fault was found, then the poor victim would not be getting any compensation.

No-fault insurance has been increasingly seen by many as a preferred alternative to the tort system. This view is driven, mainly, by perceived deficiencies in the tort system itself, rising liability insurance premiums and a belief that accident victims are not adequately compensated.??