Indiana Harbor Belt Railroad Co. v. American Cyanamid Co.
Citation: 916 F.2d 1174 (7th Cir. 1990)
Facts
American Cyanamid shipped a tank car of acrylonitrile (a toxic, flammable chemical) through Chicago. The car began leaking at a rail yard and had to be evacuated. Indiana Harbor Belt (the yard operator) incurred cleanup costs and sued Cyanamid for those costs, claiming strict liability for shipping an abnormally dangerous chemical.
Issue
Is the shipment of a hazardous chemical through a metropolitan area an “abnormally dangerous activity” subject to strict liability?
Holding
No. Judge Posner held that shipping acrylonitrile through Chicago is not abnormally dangerous for strict liability purposes. The accident was caused by negligent handling (a defective valve), not by any inherent unavoidable danger. Negligence liability creates adequate incentives to take cost-justified precautions; strict liability is inappropriate when negligence remedies are adequate.
Rule
Abnormally dangerous activities — economic analysis: Strict liability for abnormally dangerous activities is appropriate when negligence remedies are insufficient — where the danger is so great or irreducible that only strict liability creates the right incentives. If the risk can be adequately managed by taking cost-justified precautions, negligence liability is the correct standard. Shipping hazardous chemicals by rail is not itself abnormally dangerous — the risk arises from careless handling that negligence law can address.
Significance
- Judge Posner’s influential economic analysis of when strict liability vs. negligence is appropriate
- Rejected strict liability for transportation of hazardous chemicals
- Economic framework: strict liability is for activities where the cost of accidents cannot be internalized through negligence liability (e.g., ultra-hazardous activities where even careful conduct creates extreme risk)
- Frequently paired with Rylands v. Fletcher and Restatement §§ 519–520 to contrast different approaches to strict liability scope