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In economic theory, moral hazard is a situation in which a party insulated from risk behaves differently from how it would behave if it were fully exposed to the risk.
Many of you may recall that I was on the commuter train that crashed head on into a freight train in Chatsworth California
I thought I might relay my subsequent experience with “Tort Reform” and moral hazard.
I didn’t sue anyone - but I got sued. Sure enough in Federal Court even and by the very people that were responsible for the crash. Why you might ask.
There is a federal statute enacted as tort reform that caps single train crash damages. Those that caused the crash had the cap amount in insurance coverage so they filed a lawsuit (interpleader) to dispose of this mess once and for all, deposited the insurance proceeds in the cap amount with the court, sued me and the other unfortunates as defendants and said essentially, judge: “let us go and let‘em fight over the cap money between themselves.” The judge followed the law, absolved the culprits of any further financial responsibility wherever and whenever it was sought and assigned another judge as the “Decider” in allocating the funds between the unfortunates. Each unfortunate was assigned an allocation of damages hearing before the Decider. By the time the Decider got to me, I was ready1. Ready to tell him I didn’t want any money that would otherwise go to the other unfortunates. I did want, however, to make sure none of it went back to the people that caused the wreck.
I didn’t get the chance to say that, in fact I didn’t get to say much at all. Out of the box the Decider tells me there isn’t enough to go around even for those seriously injured. My hearing wasn’t fun, but as every lawyer knows some times in court you have to keep your mouth shut and let the judge verbally beat the crap out of you about something that you didn’t do2.
The Decider turned out to be a pretty smart person. He issued a stunningly descriptive opinion (the description starts on page 5) and I recommend that you read it. I provide the link to it below. Not for nothing but I “withdrew” my “claim”.
So at the end of the day this Tort Reform law transferred all of the realized risk caused by the people who caused the crash to the pocket books and broken bodies of the unfortunates. Is there moral hazard in that? I don’t know. Read the Decider’s opinion. It should be entitled “The foreseeable consequences of driving a locomotive while texting on your cell phone.”
- The lawyer for one of the culprit/plaintiffs actually filed a brief in opposition for my hearing stating that I had not proved I was on the commuter train and in the crash. This is so despite listing me as a passenger in his complaint and specifically naming me as a defendant/passenger in the Interpleader action and then having me (as opposed to some other Greg Tevis) personally served with the lawsuit. As Bill Murray in Caddie Shack says “so I got that going for me [at the hearing] which is nice.”
- The Judge was troubled that I had not initiated a lawsuit against the culprits contending that such a failure deprived him of jurisdiction over me. This was so notwithstanding the fact that the plaintiffs specifically admitted in their pleadings that I had a “claim” and that the Federal Judge transferred the claims to the Decider’s court for the claim allocation process. Given the Decider’s expression of immense frustration over the lack of adequate funds for those truly in need, I didn’t think that it was beneficial for me to point out among other things, that his court (a California state trial court) was a court of general jurisdiction and if nothing else the parties could be deemed to be subject to its jurisdiction by consent (we were present and had not filed objections to the court’s jurisdiction). So as I say above I kept my mouth shut while he talked. I knew I was going to try and get my “claim” “withdrawn.”
