The Application of Finance Theory to Increased Risk Harms in Toxic Tort Litigation
By Robert J. Rhee
ABSTRACT
In toxic tort litigation, a plaintiff has no cause of action for increased risk of harm unless that risk is proven by a preponderance of the evidence to lead to a future physical injury. This rule of law is based on an antiquated concept of uncertainty, and it evinces the law's detachment both from other intellectual disciplines and from the everyday workings of the world. This article argues that freedom from increased risk should be a legally cognizable interest, the violation of which gives rise to an independent cause of action. When analyzed under finance theory, increased risk harms a person by increasing costs, reducing economic asset value and imposing a negative value option. The damage resulting from increased risk can be quantified by applying securities and derivatives pricing techniques used in the financial markets. This article further argues that the rules of liability and damages proposed here create the singular circumstance in law where the application of a statute of limitations would be a suboptimal solution for defendants. The statute of limitations imposes a barrier to informational efficiency for both parties. Accordingly, it should be eliminated in increased risk tort cases.
In toxic tort litigation, a plaintiff has no cause of action for increased risk of harm unless that risk is proven by a preponderance of the evidence to lead to a future physical injury. This rule of law is based on an antiquated concept of uncertainty, and it evinces the law's detachment both from other intellectual disciplines and from the everyday workings of the world. This article argues that freedom from increased risk should be a legally cognizable interest, the violation of which gives rise to an independent cause of action. When analyzed under finance theory, increased risk harms a person by increasing costs, reducing economic asset value and imposing a negative value option. The damage resulting from increased risk can be quantified by applying securities and derivatives pricing techniques used in the financial markets. This article further argues that the rules of liability and damages proposed here create the singular circumstance in law where the application of a statute of limitations would be a suboptimal solution for defendants. The statute of limitations imposes a barrier to informational efficiency for both parties. Accordingly, it should be eliminated in increased risk tort cases.
