Limited liability may result in inefficient accident prevention, because a relevant portion of the expected harm is externalized on victims. This paper shows that under some restrictive conditions further limiting liability by means of a liability cap can improve caretaking.

In this study, we consider the problem of zero claims in a liability insurance portfolio and compare the predictability of three models. We use French motor third party liability (MTPL) insurance data, which has been used for a pricing game, and show that how the type of coverage and...

"Minimum asset and liability insurance requirements must often be met in order for parties to participate in potentially harmful activities. Such financial responsibility requirements may improve parties' decisions whether to engage in harmful activities and, if so, their efforts to reduce risk....

A liquidity-constrained entrepreneur needs to raise capital to finance a business activity that may cause injuries to third parties the tort victims. Taking the level of borrowing as fixed, the entrepreneur finances the activity with senior (secured) debt in order to shield assets from the tort...