Damage Compensation for Low Probability/High Damage Events

This article was prepared for a Clifford Symposium which challengedpaper writers to imagine how our system of tort compensation might lookin the year 2020. This paper responds to an aspect of the generalchallenge: to imagine a tort recovery system which would dealadequately with rare and catastrophic events. To get a handle on thisproblem, the paper looks closely at how the legal system compensateddamages attendant on four recent events that might be considered “rareand catastrophic” – Three Mile Island, 9/11, Hurricane Katrina and theExxon Valdez oil spill. In no case did the system of compensation meetall the desiderata of a well-functioning tort compensation scheme, butthe two no-fault schemes which provided the bulk of the compensation tothose injured in the Three Mile Island and 9/11 disasters seem to havedone better than the “ordinary” tort system which provided the bulk ofthe individual compensation for the damages caused by Hurricane Katrinaand the Exxon Valdez oil spill. The 9/11 compensation scheme may,however, have been sui generis since it appears to have reflected botha national coming together after an attack on the homeland andCongressional efforts to protect the airline industry, and thePrice-Anderson compensation scheme, which worked well in Three MileIsland, might have failed utterly had the disaster been on the scale ofChernobyl. Ultimately, the article concludes, no imaginablecompensation scheme is likely to adequately handle a large, unique andunexpected catastrophe, but some improvements in current law andpractice are possible and ad hoc political solutions, as with 9/11, mayhelp in some cases.