Amount Of Liability Research Articles

European Challenges to Promoting International Pooling and Compensation for Nuclear Reactor Accidents

Debate about the adequacy of civil liability and compensation arrangements for nuclear reactor accidents increased markedly after the 1986 Chernobyl accident. The subsequent development of international nuclear liability and compensation conventions has sought to address the principal deficiencies by establishing higher liability amounts and broadening the range of compensable nuclear damage, whilst leaving much of the original 1960’s nuclear liability and compensation architecture unchanged. Even with these proposed increases in operator liability and compensation amounts, it remains the case that not all the potential costs of a large nuclear accident will be covered. Moreover, many countries and nuclear power plants remain outside of the regime established by the international conventions, leaving a significant gap in the coverage of accidents having transboundary consequences. The revisions of the nuclear liability and compensation conventions have also highlighted an additional problem in that the nuclear insurance industry seems unable to cover the full range and extent of the newly expanded third party liability of nuclear operators as required, thereby complicating the ratification and entry into force of the revised instruments. Under these circumstances, governments might be tempted to continue to limit the liability of nuclear operators and rely on the provision of additional compensation from public funds in the event of a reactor accident. However relatively low levels of operator liability and compensation amounts which are markedly less than the possible damage caused by a serious nuclear reactor accident, mean that risks associated with nuclear power are borne by the general public and that the generation of nuclear electricity is effectively subsidised. Rather than seeking new financial guarantees through government intervention, it is argued in this paper that a better way forward would require that nuclear operators cover the insurance gaps through their own resources. International pooling of operators’ funds has been suggested as one such solution. The principal advantage of an operator pooling system is that large sums of private money, as opposed to public funds, can be made readily available to compensate victims of a nuclear accident. There are other potential advantages for the operator, including that this option could be a cost-effective supplement and alternative to other forms of financial security, provided pooling can be organised appropriately. This paper also considers whether such pooling might offer additional benefits, particularly in the European context, for example by realising greater harmonisation in liability and compensation arrangements, addressing the current and evolving structure of the electricity market, and by strengthening nuclear safety.

Perspective on the Pros and Cons of a Pooling-type Approach to Nuclear Third Party Liability

The system of third party liability for nuclear damage established in the 1960s has been the model for many national legal systems in countries with nuclear power programmes. However, this approach has been criticised. It is argued that, with compensation limited to certain types of damage and with limits set well below the possible consequences of an accident, not all damage arising from an accident might be compensated. Moreover, relatively low levels of operator liability mean that risks associated with nuclear power are borne by the general public and that the generation of nuclear electricity is effectively subsidised. Debate about nuclear liability and compensation arrangements increased markedly after the 1986 Chernobyl accident, which brought into stark relief numerous deficiencies in the existing regimes. The subsequent revision of the international nuclear liability and compensation conventions has sought to address this criticism by establishing higher liability amounts and broadening the range of compensable nuclear damage, whilst leaving much of the original 1960s liability and compensation structure unchanged.

Measurement of financial leverage in the presence of environmental liabilities relating to Superfund sites

This study examines the effect of environmental liabilities on risk assessment by investigating whether the markets consider these liabilities a form of corporate debt in the assessment of the firm's risk. A model developed by Rubinstein (1973) and further expanded and operationalised by Dhaliwal (1986) is used to examine whether the inclusion of environmental liabilities relating to Superfund sites has any incremental explanatory power. A positive association between the environmental liabilities and measures of firms' risk is expected. Such results should help policy-makers decide whether or not to require companies to disclose environmental liabilities in their financial reports. The empirical results weakly support the hypothesis that environmental liabilities relating to Superfund sites are considered corporate liabilities in assessing firm's risk. One possible explanation is that the problems in recognising and determining the exact amount of liabilities for the Potentially Responsible Party (PRP) firms make it difficult for the investors to use this information for risk assessment. This paper addresses some important issues such as reporting environmental liabilities in the financial statements, their recognition and their roles in firm risk assessment.

Reserve Requirement Systems in OECD Countries

This paper compares the reserve requirements of OECD countries. Reserve requirements are the minimum percentages or amounts of liabilities that depository institutions are required to keep in cash or as deposits with their central banks. To facilitate monetary policy implementation, twenty-four of the thirty OECD countries impose reserve requirements to influence their banking systems’ demand for liquidity. These include twelve OECD countries that are also members of the European Economic and Monetary Union (EMU) and twelve non-EMU OECD countries. All EMU countries employ a single reserve requirement system, which is treated as one entity. ; The reserve requirement system for each of the twelve non-EMU countries is discussed separately. The similarities and differences among the thirteen reserve requirement systems are highlighted. The features of reserve requirements covered include: reservable liabilities, required reserve ratios, reserve computation periods, reserve maintenance periods, types of reserve requirements, calculations of required reserves, eligible assets for satisfying reserve requirements, remuneration on reserve balances, non-compliance penalties, carry-over of reserve balances, and required clearing balances.

Pension funds and the evolving market for (ultra-)long government bonds

The demand for long-dated bonds has increased, driven by stricter asset–liability matching regulations governing pension funds, new international accounting standards, as well as new risk-based regulations for insurance companies. Projections of rapidly ageing and longer-living populations in most OECD countries indicate that the demand for ultra-long paper is poised to grow further. Governments in several OECD countries have responded to that demand by starting or re-introducing the issuance of very long (20–30 years) and ultra-long (30 years and longer) bonds, provided that the issuance of those bonds is consistent with the cost-risk objectives of cost minimisation subject to a preferred level of risk. An important consideration for issuers is that pension funds and insurance companies are to some degree buy-and-hold investors. This may lead to illiquid markets in long-dated paper when the ongoing supply of (ultra-)long government bonds remains below a certain critical level, resulting in higher government borrowing costs than paper issued in liquid markets. Changes in regulatory standards and the adoption of new international reporting standards have increased the focus on liability-driven investing by pension funds. Although there is no useful (reliable) mechanical rule to determine — on the basis of a given amount of liabilities — the extent to which assets will be invested in (ultra-)long bonds, it is likely that there will be some re-allocation of the assets of many pension funds and insurance companies towards (ultra-)long bonds. Views, however, differ as to the pace and magnitude of such a re-allocation. Timing, however, remains a problem for many pension funds because of today's low interest rate situation, the ongoing financial turmoil and associated liquidity and risk-pricing problems. Against this backdrop many observers expect a gradual increase in the average duration of bond holdings because large-scale moves are expensive in the present low interest rate but highly uncertain environment.

Ethical Issues in Financial Reporting: Is Intentional Structuring of Lease Contracts to Avoid Capitalization Unethical?

Under present accounting rules, lessees frequently structure contracts for leased assets, in situations where they enjoy benefits similar to outright ownership, in a way that keeps both the leased assets and related liabilities off their books. This method of accounting creates off-balance sheet financing and is called operating lease accounting. The paper debates the ethicality of intentionally structuring lease contracts to avoid disclosing leased asset and liability amounts and describes the “slippery slope” of rule-based accounting for synthetic leases and special purpose entities, that, in the author’s opinion, led to the accounting debacles at Enron and other companies. The ethical intent that is implicit in the Securities and Exchange Commission and Financial Accounting Standards Board regulations is discussed and suggestions for improving the ethicality of financial reporting are provided.

Limiting Auditor Liability? - Experimental Evidence on Risk and Ambiguity Attitudes under Real Losses

This paper is motivated by the current debate on limiting auditor liability. In a laboratory experiment, the effect of limited versus unlimited liability on behavior under risk and ambiguity is investigated for risks involving small probabilities. The amount of liability is manipulated in such a way that subjects can pay with their show-up fee under limited liability, but they can suffer out-of-pocket losses under unlimited liability. Findings are that both risk aversion and ambiguity aversion are higher under unlimited liability than under limited liability, and these two constructs are correlated under unlimited liability. These findings provide new empirical evidence for the intuition that aversion toward risk and ambiguity plays an especially important role in auditor behavior under unlimited liability. Our experimental results emphasize the importance of considering risk and ambiguity attitudes in economic models on liability, especially when liability regimes are compared that differ in liability limits or ambiguity.

Reserve Requirement Systems in OECD Countries

This paper compares the reserve requirements of OECD countries. Reserve requirements are the minimum percentages or amounts of liabilities that depository institutions are required to keep in cash or as deposits with their central banks. To facilitate monetary policy implementation, twenty-four of the thirty OECD countries impose reserve requirements to influence their banking systemsâ demand for liquidity. These include twelve OECD countries that are also members of the European Economic and Monetary Union (EMU) and twelve non-EMU OECD countries. All EMU countries employ a single reserve requirement system, which is treated as one entity.The reserve requirement system for each of the twelve non-EMU countries is discussed separately. The similarities and differences among the thirteen reserve requirement systems are highlighted. The features of reserve requirements covered include: reservable liabilities, required reserve ratios, reserve computation periods, reserve maintenance periods, types of reserve requirements, calculations of required reserves, eligible assets for satisfying reserve requirements, remuneration on reserve balances, non-compliance penalties, carry-over of reserve balances, and required clearing balances.

Nuclear liability for international transport accidents under the modernised nuclear liability conventions: an assessment

The last decade saw the adoption of four new nuclear liability treaties, resulting in a modernisation of the existing nuclear liability regime. If applicable, the nuclear liability situation, in the case of international transport, might become more complicated, but at the same time also more transparent, should these treaties enter into force for certain States, but not for others. For instance, the extension of the geographical scope and the definition of nuclear damage, as well as the increased liability amounts, will result in higher liability coverage for a wider category of victims than before. On the other hand, the risks of claims outside the nuclear liability regime under other laws and/or in different courts, might be reduced. This paper analyses the possible consequences of nuclear liability protection applicable to multimodal nuclear transport, the cause generatrice being a catastrophic accident causing wide-scale transboundary damage involving different countries.

Piercing the Corporate Veil, Financial Responsibility, and the Limits of Limited Liability

This article takes a fresh look at veil-piercing jurisprudence, a notoriously incoherent area of the law. I argue that a sensible approach to veil-piercing requires careful attention to the appropriate policy basis for limited liability. Despite heroic efforts of some commentators, shareholder limited liability for contract as well as tort claims and for public as well as closely-held corporations cannot be defended on efficiency grounds alone. Instead, limited liability should be understood as an effort to subsidize business activity by redistributing wealth from corporate creditors to shareholders. The subsidy idea is more obvious as to tort claimants, but it may also be at work in the contract area too. Contract creditors have the opportunity to bargain for compensation for the increased of risk of nonpayment presented by limited liability. Nevertheless, recent research in behavioral economics suggests that the limited liability default rule may have distributional consequences in this setting as well. If limited liability amounts to a subsidy paid by contract and tort creditors to business investors, the policy question then is, how large should this subsidy be? I argue that overly broad limited liability imposes too great a cost on corporate creditors. This is because limited liability can facilitate opportunistic efforts by shareholders to extract value from third parties without consent or compensation. They can do this by increasing the risk of corporate default beyond the level accepted by contracting parties or by engaging in risky activities that have the potential to cause harm that the corporate tortfeasor cannot redress. One consequence of the threat of opportunism is to raise the cost of credit for all corporate borrowers (good as well as bad types). If the purpose of limited liability is to encourage investment by shielding shareholders from the risk of corporate insolvency, the social costs of this benefit may therefore be too high. The scope of limited liability should instead be restricted to cases of corporate insolvency that occur in spite of shareholders' good faith efforts to manage their firm in a manner that respects creditor interests. This limitation would still provide investors with protection from what should be their real concern, the possibility of corporate insolvency arising from events or circumstances that cannot be foreseen or avoided. I propose that courts limit limited liability to shareholders who have managed their corporation in a financially responsible manner. As to contract creditors, this means realistic evaluation of the corporation's ability to repay a debt at the time it is incurred and avoidance of actions that unreasonably increase the risk of default thereafter. As to potential tort victims, shareholders act responsibly if they purchase liability insurance against foreseeable risks. Financial responsibility thus has nothing necessarily to do with the amount of capital contributed to the business at its outset, a factor often emphasized in veil-piercing litigation. Once the appropriate limits of limited liability are understood, courts can pierce the corporate veil in order to hold shareholders personally liable for losses that result from their irresponsible behavior.

The Mitigation of Emotional Distress Damages

In what may be a unique exception to the mitigation requirement, plaintiffs claiming damages for emotional distress need not show that they have taken any steps to mitigate their damages. The absence of mitigation rules creates a previously unrecognized tendency towards overcompensation in emotional distress claims. The mitigation rule (also known as the doctrine of avoidable consequences) requires injured parties to take all reasonable measures to minimize their damages. Mitigation is a well-established and universal principle of damages; it limits recovery in every conceivable type of action for money damages. The mitigation requirement serves to limit plaintiffs' ex post moral hazard, which arises because defendants serve as insurers of plaintiffs' losses. However, despite the rapid expansion of liability for emotional distress, courts have failed to apply the mitigation rule to such damages. The absence of mitigation rules for emotional distress creates particular problems of moral hazard that courts have not yet considered. Any evaluation of the advisability of recovery for emotional distress must take into account the absence of the traditional legal mechanism for limiting plaintiffs' moral hazard. Perhaps one reason mitigation has not been applied to emotional distress is the difficulty of crafting a workable definition of what such mitigation would look like. Some obvious definitions of mitigation, like seeking psychiatric treatment, would likely create more problems than they would solve. Thus measures to limit moral hazard in emotional distress must take the form on limitations on the scope of recovery or the amount of liability.

Pretrial negotiation behind open doors versus closed doors:: Economic analysis of Rule 408

In this paper, we examine the economics of Rule 408 of the Federal Rules of Evidence, whereby the negotiation processes at the pretrial stage are made inadmissible to prove the amount of liability. It is asserted that under Rule 408 a settlement offer is less inclined to be rejected since the judge is expected to make a lower award given the signal he observes. Also, we derive a sufficient condition for Rule 408 promoting settlement.

Ionizing radiation and genetic risks VIII. The concept of mutation component and its use in risk estimation for multifactorial diseases

Multifactorial diseases, which include the common congenital abnormalities (incidence: 6%) and chronic diseases with onset predominantly in adults (population prevalence: 65%), contribute substantially to human morbidity and mortality. Their transmission patterns do not conform to Mendelian expectations. The model most frequently used to explain their inheritance and to estimate risks to relatives is a Multifactorial Threshold Model (MTM) of disease liability. The MTM assumes that: (i) the disease is due to the joint action of a large number of genetic and environmental factors, each of which contributing a small amount of liability, (ii) the distribution of liability in the population is Gaussian and (iii) individuals whose liability exceeds a certain threshold value are affected by the disease. For most of these diseases, the number of genes involved or the environmental factors are not fully known. In the context of radiation exposures of the population, the question of the extent to which induced mutations will cause an increase in the frequencies of these diseases has remained unanswered. In this paper, we address this problem by using a modified version of MTM which incorporates mutation and selection as two additional parameters. The model assumes a finite number of gene loci and threshold of liability (hence, the designation, Finite-Locus Threshold Model or FLTM). The FLTM permits one to examine the relationship between broad-sense heritability of disease liability and mutation component (MC), the responsiveness of the disease to a change in mutation rate. Through the use of a computer program (in which mutation rate, selection, threshold, recombination rate and environmental variance are input parameters and MC and heritability of liability are output estimates), we studied the MC-heritability relationship for (i) a permanent increase in mutation rate (e.g., when the population sustains radiation exposure in every generation) and (ii) a one-time increase in mutation rate. Our investigation shows that, for a permanent increase in mutation rate of 15%, MC in the first few generations is of the order of 1–2%. This conclusion holds over a broad range of heritability values above about 30%. At equilibrium, however, MC reaches 100%. For a one-time increase in mutation rate, MC reaches its maximum value (of 1–2%) in the first generation, followed by a decline to zero in subsequent generations. These conclusions hold for so many combinations of parameter values (i.e., threshold, selection coefficient, number of loci, environmental variance, spontaneous mutation rate, increases in mutation rate, levels of ‘interaction’ between genes and recombination rates) that it can be considered to be relatively robust. We also investigated the biological validity of the FLTM in terms of the minimum number of loci, their mutation rates and selection coefficients needed to explain the incidence of multifactorial diseases using the theory of genetic loads. We argue that for common multifactorial diseases, selection coefficients are small in present-day human populations. Consequently, with mutation rates of the order known for Mendelian genes, the FLTM with a few loci and weak selection provides a good approximation for studying the responsiveness of multifactorial diseases to radiation exposures.

Debt Relief

Among the many aspects of the debt-relief issue that have been discussed so intensively during the past few years, one aspect refers to the measurement of the effective costs for commercial and public creditors offering at least partial forgiveness of their claims against sovereign debtors. An increasing number of economists have recently argued that the effective economic costs of debt relief are often exaggerated by politicians and businessmen, as they misleadingly tend to identify this burden with the nominal amount of liabilities forgiven. The advocates of formal debt relief, on the other hand, expect that a waiver would induce the so-called proincentive effects of debt relief (Corden 1988, p. 631), that is, major stimulating effects on the aggregate production and income of the debtor countries resulting from the induced release of the debtor countries' resources. Resources that previously had to be devoted to the service of foreign obligations are now set free for productive use. The stress of public budget requirements often enforcing prohibitive taxation on domestic resources is reduced, as are the resulting distortions in the relative prices in factor and goods markets. Moreover, as transfer risks for foreign investors

Efficient and Nearly-Efficient Partnerships

This paper shows in two ways that the degree to which free-riding diminishes the performance of deterministic partnerships may be less than has been generally thought. First, a necessary and sufficient condition is provided for a partnership to sustain full efficiency. It implies that many non-trivial partnerships sustain efficiency, such as generic ones with finite action spaces, and neoclassical ones with Leontief technologies. Second, approximate efficiency is shown to be achievable in a large class of partnerships, including ones with smooth and monotonic production and disutility functions. Approximate efficiency is achieved by mixed-strategy equilibria: one partner takes, with small probability, an inefficient action. The degree to which efficiency is approximated is restricted only by the amount of liability the partners can bear. Nonetheless, their equilibrium payments are not arbitrarily large.

Pricing Hazardous‐Waste Risk

A procedure is presented to analyze and price the risk from engineering or construction contracts involving hazardous‐waste projects. The procedure is based upon using a newly developed computation to assign a defined dollar amount to part of the revenue of a project that specifically creates the future risk. The hazardous‐waste risk is defined to include litigation costs, liability judgments, and settlements. The computation is premised upon funding a future probability portion of liability, along with its cost of administration, and is developed on engineering economics theory. The computation is adapted to standard contract pricing techniques. Time period of liability occurrence, liability amount, and probability of liability occurrence within the time period must be selected as computation parameters. These parameters are discussed and numerical ranges are suggested. Sources of liability, insurance, and a tax implication are also discussed. Two examples are selected—an engineering contract and a const...

Product Liability Goes to Sea: A Survey of the Legal Liability of Sellers and Manufacturers in the Marine Industry

United States law imposes potential liability on sellers and manufacturers of maritime products that prove to be defective in design or production. The degree of their vulnerability depends on the nature of the damage that results from the defect and their legal relationship with the person who suffers the damage. When the defect results in death or bodily injury, the potentially liable party cannot act be-forehand to limit the persons to whom he is liable or the amount of his liability. Common issues in such cases are causation, often based on expert testimony or government reports, hindsight determination of design defects or failures to warn adequately of unavoidable hazards, and foreseeable human errors. If damages are "economic," however, the seller's or manufacturer's liability may be limited to those with whom he had contracted directly, and the contract can further limit the amount of liability to those persons and the methods by which they can enforce what rights they have.

Examples of Economic Losses, from Hail in the United States

Abstract Crop-hail insurance companies, both private and governmental, insure about 15% of the national crop value, and their data represent a better source of information to evaluate economic aspects of hail loss than exist for any other form of severe weather. Past results and these insurance data were used 1) to illustrate variations in hall losses on various time and space scales, and 2) to reveal through these Illustrations the limitations in the available information and the need to make estimates to derive total hail loss for any period or place. The nation's greatest hail loss area is the Great Plains ($86 million annually) with the Corn Belt area ranking second ($67 million). Illinois rank first in the amount of liability; North Carolina ranks first in total insurance premiums and in number of paid losses; Idaho first in the average amount paid for an individual loss; and North Dakota first in total crop loss. Little information exists about property losses from hail, but limited Illinois studies...

Business Failures in Construction

The tremendous potential of the construction industry is outlined against a rising trend of failures. These failures are analyzed by type of contractor, the amount of liabilities, and by geographic regions. The underlying cause of more than 85% of the construction failures in recent years is traced to poor management practices. To help reverse the present failure trend in the construction industry, contractors are encouraged to evaluate the use of technical and on the job training courses, to develop and use key index ratios, and to keep close tab on the bidding and cost control procedures.

Carriers: Limitation of the Amount of Liability

Carriers: Limitation of the Amount of Liability