Introduction
Private law is usually seen as a system for resolving disputes between private parties. Tort law, in particular, is often described as a mechanism of corrective justice: it transfers resources from a wrongdoer to a victim to repair harm. On this traditional view, tort adjudication is a private matter, serving mainly the litigants involved. Yet this understanding is increasingly challenged. Courts do more than settle disputes; they articulate norms, influence behavior, and shape social expectations. This raises a deeper question: can private law tort adjudication be understood as a public good?
The issue becomes sharper when we consider the dissipation of damages. Compensation awarded in tort cases is often reduced by transaction costs—legal fees, expert expenses, insurance administration, delays, and enforcement inefficiencies. If damages are substantially dissipated before reaching victims, the private benefit of tort adjudication appears weakened. However, if adjudication still produces wider social benefits—such as deterrence, norm articulation, and institutional accountability—its justification may rest less on private compensation and more on its public good character.
This article examines whether tort adjudication can be conceptualized as a public good, using the dissipation of damages as a central lens. It argues that while dissipation undermines the compensatory rationale of tort law, it paradoxically strengthens the case for its public role. Tort adjudication, even when imperfect in delivering compensation, contributes to broader social functions that justify its continued institutional support.
This article argues that damages dissipation does not delegitimize tort law but instead reveals its fundamentally public character.
Understanding Tort Adjudication: Private Law and Public Effects
Tort law deals with civil wrongs such as negligence, nuisance, defamation, trespass, and strict liability. Its basic structure is bilateral: plaintiff versus defendant. Remedies are individualized, usually monetary damages and sometimes injunctions. This bilateral form has long supported the idea that tort law is essentially private.
Yet adjudication is not isolated. Court decisions are public acts, backed by state authority, enforceable through coercion, and preserved as precedent. Each ruling can shape behavior beyond the immediate parties. A negligence case against a hospital may raise standards of care across the medical field. A product liability judgment may alter corporate design choices. A defamation ruling may influence media practices.
These spillover effects show that tort adjudication produces benefits that are non-excludable and non-rivalrous—features of public goods. Once a legal standard is clarified, everyone can use it without reducing its value. This public dimension becomes especially important when private benefits shrink due to the dissipation of damages.
Dissipation of Damages: Meaning and Mechanisms
Dissipation of damages means that the compensation awarded by a court is reduced before it actually reaches the victim because of legal fees, expert expenses, delays in litigation, and insurance-related costs. For instance, in a negligence case where a court awards ₹10 lakh, the victim may finally receive only ₹4 lakh after deducting lawyer’s fees, procedural costs, and the effects of long delays. As a result, the victim is not fully compensated for the harm suffered.
Beyond compensation, dissipation also refers to situations where damages fail to serve the wider public purpose of private law. Although tort and contract law resolve disputes between individuals, they also aim to deter wrongful conduct, set standards of behaviour, and promote trust in the legal system. When damages are too small, delayed for years, paid by insurers or the State instead of the actual wrongdoer, or treated merely as a cost of doing business, their deterrent and corrective impact weakens, reducing the broader social value of private law.
For example, if a polluting factory pays small compensation to affected residents but continues polluting, or if the State pays damages for illegal detention without holding responsible officials accountable, the money is awarded but social behaviour does not change. In such cases, damages dissipate, and the public good dimension of private law—its ability to influence future conduct and protect society at large—is undermined.
Legal and procedural costs such as attorney fees, court charges, and expert witness expenses can consume a large share of awards. Delay and uncertainty in litigation reduce the real value of compensation, while also imposing psychological and financial burdens. Insurance intermediation adds administrative costs, and in some cases insurers pursue subrogation claims that further reduce payouts. Enforcement inefficiencies—such as insolvent defendants or weak enforcement systems—limit recoverability. Finally, taxation and opportunity costs mean that awards may be taxed or arrive too late to restore victims to their original position.
Empirical studies across jurisdictions show that victims often receive only a fraction of the social cost of the harm they suffered. For example, in medical negligence cases, legal fees and delays can consume more than half of the awarded damages. This reality poses a serious challenge to the compensatory justification of tort law, raising questions about whether its true value lies in broader public functions beyond private compensation.
The Compensatory Rationale Under Strain
Traditionally, tort law is justified as a system of compensation: restoring victims, as far as money can, to the position they would have occupied but for the wrong. Yet the dissipation of damages undermines this rationale in several ways.
First, under-compensation becomes routine rather than rare. If victims regularly receive far less than their actual losses, tort law fails in its most basic moral promise.
Second, dissipation affects weaker litigants more severely. Wealthier plaintiffs can better absorb costs and delays, while poorer victims may be discouraged from filing claims at all. This creates unequal access to justice.
Third, when compensation is unreliable, the legitimacy of tort law as a corrective justice mechanism is weakened. Critics may argue that administrative schemes or no-fault systems offer fairer and more efficient alternatives.
If tort adjudication were justified only by private compensation, dissipation would be a decisive critique. Yet tort law persists—and even expands—in many jurisdictions. This persistence suggests that its true function may lie beyond compensation, inviting a broader reassessment of its role.
Tort Adjudication as a Public Good
A public good is defined by two features: non-rivalry (one person’s use does not reduce availability to others) and non-excludability (others cannot easily be excluded from benefiting). If tort adjudication is seen only as compensation, it does not fit this definition. But if viewed more broadly—as a system of norm creation and enforcement—it does.
- Norm Articulation and Legal Clarity: Court decisions clarify standards of reasonable care, lawful conduct, and acceptable risk. Once established, these norms guide society at large. For example, a negligence ruling against a hospital informs not only the litigants but also doctors, regulators, insurers, and patients. This guidance is non-rivalrous and non-excludable.
- Deterrence and Risk Regulation: Even when damages dissipate, liability deters harmful conduct. Corporations adopt safety measures not simply to compensate victims but to avoid reputational and financial costs. A product liability case, for instance, may push companies to redesign unsafe goods, benefiting consumers broadly.
- Accountability and Institutional Discipline: Tort litigation exposes systemic failures—unsafe products, negligent authorities, or environmental harms—that might otherwise remain hidden. Courts serve as forums of accountability, especially where regulators are weak. This watchdog role benefits society far beyond the individual plaintiff.
- Expression of Social Values: Tort judgments express moral condemnation of wrongful conduct and affirm values like bodily integrity, dignity, and property rights. Even if damages are imperfectly delivered, the symbolic statement of a judgment reinforces social norms and democratic principles.
Taken together, these functions show that tort adjudication is not merely private compensation. It is a hybrid institution that produces public goods—clarity, deterrence, accountability, and value expression—justifying its continued role despite inefficiencies.
Dissipation Revisited: Weakness or Evidence
The dissipation of damages—where victims receive less compensation due to legal fees, delays, or insurance costs—seems like a weakness in tort law. Yet it can also be evidence that tort adjudication’s main role is not private compensation. If society continues to invest in a system known to be inefficient, it suggests other benefits are at work.
Tort adjudication produces public goods: deterrence, accountability, and norm-setting. For example, a negligence case against a hospital may raise standards of care across the medical sector. A product liability ruling can push companies to redesign unsafe products. In this way, plaintiffs act like private attorneys general, bearing costs that generate benefits for many.
Thus, dissipation highlights tort law’s hybrid nature—private disputes serving broader public purposes.
Objections and Counterarguments
Objection 1: Public Goods Should Not Be Privately Financed
Critics argue that if tort adjudication produces public goods, it is unfair to finance them through individual plaintiffs who bear litigation costs and risks. This objection is strong and highlights a tension in the system. Yet many public goods—such as whistleblowing, investigative journalism, or constitutional litigation—are also produced through private initiative with uneven cost distribution. The solution may not be to abandon tort adjudication, but to reduce dissipation through cost-shifting rules, legal aid, contingency fees, or collective actions.
Objection 2: Regulation Is a Better Tool
Another objection claims regulation, not tort law, should produce public goods like deterrence and safety. Regulators can act in advance, systematically, and with technical expertise. However, regulation and tort law are complements, not substitutes. Regulation sets minimum standards, while tort law addresses unforeseen risks, enforcement gaps, and individualized harms. Tort adjudication also provides contextual nuance that bureaucratic rules may lack.
Objection 3: Excessive Litigation and Chilling Effects
Some worry that framing tort adjudication as a public good legitimizes excessive litigation, over-deterrence, and defensive practices. This risk is real, but it does not erase the public dimension of tort law. Instead, it calls for calibrated doctrines—standards of care, causation thresholds, and proportional damages—to balance deterrence with social utility.
Implications for Tort Law Reform
If tort adjudication is recognized as a public good, several reforms follow:
- Rethinking damages: Courts may justify damages not only by victim loss but also by norm reinforcement and deterrence.
- Reducing dissipation: Procedural reforms should lower transaction costs, since excessive dissipation undermines both private justice and public legitimacy.
- Collective mechanisms: Class actions and representative suits can spread costs and strengthen the public-good function of adjudication.
- State support: Public funding or institutional backing for strategically important tort cases may be justified, similar to public interest litigation.
Conclusion
The dissipation of damages challenges the traditional view of tort law as a system of private compensation. Victims often receive less than full redress, and the process is costly and imperfect. Yet these flaws reveal a deeper truth: tort adjudication functions as an institution that produces public goods.
Through deterrence, accountability, norm articulation, and expressive judgment, tort law generates benefits that extend far beyond the litigants. These benefits are non-rivalrous, non-excludable, and socially valuable. Dissipation weakens the compensatory story but strengthens the case for tort adjudication as a public good.
Recognizing this public dimension does not mean abandoning private law principles. Instead, it calls for a more honest understanding of what tort law achieves and why society continues to rely on it. The challenge is not to eliminate dissipation entirely—an unrealistic goal—but to ensure that the public goods created by adjudication justify its costs and are distributed fairly. In this way, tort law remains vital despite its imperfections.
