A law and economics approach to cost shifting, fee arrangements and legal expense insurance

Introduction. In this chapter, we will provide an overview of the economic literature regarding cost shifting, fee arrangements and legal expense insurance. In the economic analysis of law, legal rules are regarded as instruments which can provide actors with behavioural incentives. In essence, private law (torts, contracts, property, etc.) allocates the costs which arise out of different activities. Those costs may only be borne by the party causing them if the party initially suff ering from them brings suit. Problems in fi nancing civil litigation may eff ectively hinder such lawsuits, so that the behavioural incentives which the law intends to provide do not reach the party causing the harm. ... etc.