Liability and Insurance after September 11: Embracing Risk Meets the Precautionary Principle

In the opening essay in Embracing Risk: The Changing Culture of Insurance and Responsibility, Jonathan Simon and I assert that western society is engaged in a transformation from a dominant paradigm of spreading risks to a paradigm that involves embracing risk. (Baker & Simon, eds. 2002) The core idea behind this trend is the recognition that too much protection against loss produces too much loss. Not all risks should be spread. For their own and society's good, individuals should embrace some risks. As we wrote: "As more of life is understood in terms of risk, taking risks is increasingly what one does with risk." Embracing Risk closes with a wonderful essay by Francois Ewald that also posits a paradigm shift. (Ewald 2002) But this paradigm shift revolves around the precautionary principle, an evolving principle in international law that calls for hesitating in the face of uncertainty, avoiding risk "zero risk" rather than "embracing risk." Ewald identifies popular support for this principle as among the most important reactions to the failure of the insurance state to protect citizens from risk, a charge that surely resonates in the wake of September 11th. The concept of embracing risk resonates much less well with September 11th. None of the victims made any relevant choices. No one, or at least no one we would want to emulate, is embracing terror risks. Precaution is the order of the day. Yet, I continue to see evidence of the embracing risk thesis at work, though September 11th has made that claim a more measured one. My goal in this essay is to suggest how it might be that the insurance state spawned these two seemingly contradictory reactions, how those reactions are in fact less contradictory than they at first appear, and what the embracing risk thesis and the precautionary principle might portend for liability and insurance after September 11th. I will conclude by suggesting that part of the answer to some looming 21st century insurance problems is to resurrect two distinctly two 19th century ideas: the assessment approach to insurance and the concept of insurance regulation as an antidote to destructive competition.