Reference no: EM133478242

The Hand Formula - Background Learned Hand's cost benefit analysis states that a decision maker breaches a duty of care when he fails to take precautions that would cost less than the probability of loss multiplied by the magnitude of harm if the loss occurs.

Two Proposed Precautions to Analyze Using the Hand Formula

First Fact Pattern Potential Liability Problem Being Addressed Your drivers report to your company's "home base" to begin their shift, and then leave from the site in a company-owned vehicle to make deliveries. Several accidents (some of them involving significant damage and injuries) have now occurred as your drivers pull out of your parking lot into traffic. Proposed Precaution You believe this is due to very bad visibility exiting the lot into the street, which could likely be solved by the placement of two convex mirrors costing approximately $100 each.

Second Fact Pattern Potential Liability Problem Being Addressed Accidents due to speeding Proposed Precaution A salesman approached you about installing computerized speed limiters on the engine of each company vehicle, limiting the maximum speed of the vehicle. The proposed maximum speed would be 70 mph. Each of these devices costs approximately $500, plus maintenance. In the last two years, the fastest speed of a company vehicle involved in an accident was 54 mph.

Two Questions

Question 1: For each of the two proposed precautions set forth above:

Please explain whether or not the Hand Formula suggests that you should take the proposed precaution.
Try to make predictions based on the given information.

However, if you believe more information is necessary to perform the cost benefit calculation, please state what additional information you would like to have.

Question 2: For each of the two potential liability problems set forth above, provide at least one outside-the-box, creative solution/precautions and explain how the Hand Formula would apply to your proposed solution/precautions.