Private Law Theory

ABSTRACT
When a primary event creates potential harm that victims can mitigate, a liability gap arises under negligence: firms pay only residual harm, not victims’ mitigation costs. This gap causes firms to underinvest in precaution and victims to underprotect – and paradoxically widens as victims become more effective. The gap also distorts ex post monitoring: non-compliant firms over-invest because they capture liability reductions without bearing victim costs. With judicial error, even compliant firms may conceal accidents to avoid wrongful liability. Strict liability avoids the gap but eliminates victim care incentives, inducing over-precaution. We derive policy implications for damage rules and disclosure mandates.

Kim, Byung-Cheol and Kim, Jeong-Yoo and Park, Jiwoo, The Liability Gap in Sequential Accidents: Why and When Standard Tort Rules Fail (January 14, 2026).