Dispatches from Vietnam: #3 - Lawsuit Culture (or lack thereof)

I just got back from a two-day cruise in Halong Bay, a bay a few hours outside of Hanoi. Rather than repeat a lot of information, I'll just point you to the post my mom posted on her blog about it that has lots of pictures.

But there was one interesting cultural difference we noticed. Throughout the trip we remarked on how if we were doing this in the United States, we would have to wear life vests everywhere we go, and we would have to sign all sorts of waivers. It really does make you think about how much more "lawsuit happy" our culture is than many others. (Of course, if the alternative is to beat people up, as I mentioned a couple blog posts ago, it may not be so bad in comparison.)

This issue does, however, give me an opportunity to blog about something that I thought would be an interesting topic but didn't really have the occasion for. And that is, just how good is our "lawsuit culture" at deterring harmful behavior? Consider the following real-life scenarios:

1. The Amtgard kingdom of Crystal Groves has liability insurance. It got this insurance because it was required to by the park it plays at. (Many, if not most, event sites will require that people renting them out have liability insurance. Even though Crystal Groves usually plays at a public park, the park still required them to have insurance.

IIRC (If I remember correctly), this insurance costs about $1,600 per year for a kingdom of about 200 people (maybe less, I'm not sure exactly). Additionally, the insurance company offered to extend it to our own barony of Solstice at a cost of $1 per person per year. Assuming that the actuarial value (i.e. the actual expected amount of losses from injuries or lawsuits) is approximately proportional to the number of people, and this offer was not a money-losing proposition for the insurance company, the actuarial value of the original policy is at most about $200 per year. In other words, almost 90% of the cost goes to administrative costs and profit for the insurance company, not actual compensation for risk. (And even the other 10% consists partially of court costs and other expenses not related to actual treatment of potential injuries.) Is this really the most efficient system?

2. The built-in navigation system on the Toyota Prius is designed with a feature that prevents it from being operated when the car is in motion. The purpose of this is to prevent drivers from taking their eyes off the road the use the navigation system. Of course it also means that even if there is a passenger in the car, he can't use the navigation system. (This could even reduce safety in some situations: let's say you're on a highway going 70 mph and you have to pull over, program the navigation system, and merge back into highway traffic.) On 2005 and earlier models, there was a hidden menu that enabled the user to override this lockout. After users discovered this, it was removed from later models. Currently, there are companies that sell devices which can be installed in the Prius that will override the lockout on newer models.

Effectively, Toyota is engaged in an arms race against its own customers in an attempt to reduce the functionality of its product in order to avoid lawsuits. One solution would be if it was possible to sign a legally binding waiver to not sue due to accidents caused by using the navigation systenm, and if you signed that waiver then they would unlock the navigation system for you. But of course if you actually signed a waiver like that, it would probably not be upheld in court. Effectively the consumer's inability to credibly commit to not suing hurts them, because it stops them from using the navigation system (or forces them to buy costly insurance, in the case of the first scenario above).