36 RAND JOURNAL OF ECONOMICS 494 (2005)
The purpose of this paper is to examine optimal individual and entity-level liability for negligence when expected accident costs depend both on the agent’s level of expertise and the principal’s level of authority. We consider these issues in the context of physician and managed care organization (MCO) liability for medical malpractice. Under current law, physicians generally are considered independent contractors and hence MCOs are not liable for negligent acts by physicians. We find that the practice of reviewing the medical decisions of physicians affects their incentives to take care, which, in turn, implies that it is efficient for MCOs to be held liable for the torts committed by their physicians.
Date of Authorship for this Version
Arlen, Jennifer and MacLeod, W. Bentley, "Torts, Expertise, and Authority: Liability of Physicians and Managed Care Organizations" (2005). New York University Law and Economics Working Papers. Paper 23.