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QOTD: Make Consumers Buy Their Own Insurance February 21, 2008

Posted by federalist in Judiciary, Markets, Real Estate.

You can buy insurance against various misfortunes that might befall you.  You can also play our “jackpot justice” system and try to cash in on someone else’s insurance.  The problem with the latter option is that it is fraught with moral hazards.

Corey Cohen offers an excellent solution that extends a proven concept:

Title insurance is little more then a mandated malpractice policy for lawyers that is purchased, in most cases in its entirety, by the homeowner. If a “title defect” occurs, the title insurance completely indemnifies the lawyer who performed the contracted service. In those states that don’t require title insurance, a form must be completed that releases the lawyer from responsibility for forged or poorly performed searches. Either way, the potential injured party, the borrower, is responsible for the cost.

I don’t understand why other providers of goods and services aren’t allowed to mandate upfront indemnification. I’m sure that if given the chance, large retailers like Wal-Mart, which face expensive lawsuits related to in-store injuries, would love a chance for “pay-as-you-go” legal coverage. They could collect a dollar at the door from customers to cover any injury that might occur in the store, or have them sign a waiver releasing the corporation from any injuries that occur from things other then falling prices.

As an emergency physician I would welcome the ability to request payment for individual indemnification on a patient-to-patient basis like the government-mandated, consumer-purchased “malpractice” policy that protects my brethren in the legal profession.

I.e., at least make customers pay for their lottery ticket if they want the right to sue.  And give people like me who don’t want to pay these jackpots a chance to opt out.



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