Insuring Corporate Crime

Corporate criminal liability has become an important and much-talked about topic. This Article argues that entity-based liability-particularly the manner in which it is currently applied by the federal government---creates social costs in excess of its benefits. To help companies better deter employee crime, the Article suggests the abolition of entity-wide criminal liability, and in its place, the adoption of an insurance system, whereby carriers would examine corporate compliance programs, estimate the risk that a corporation's employees would commit crimes, and then charge companies for insuring those risks. The insurance would cover civil penalties associated with the entity's employee-related criminal conduct.

Part I begins with a discussion of corporate criminal liability and the costs that accrue from the manner in which it has been implemented by the Department of Justice. Part II examines several proposals to change corporate criminal liability, and explains why most of these proposals would barely alter the current structure. Part III lays out the proposal for an insurance system in lieu of entity-based criminal liability and explains, in rough form, how corporate entities might contract for insurance, how claims might be filed, and how damages might be measured. Part III also addresses a number of arguments that others might raise against the proposal.