Another large risk for private investors is tort liability.[270] The Congressional Budget Office, in its 1997 memorandum on toll roads, noted that potential tort liability poses a significant risk to private investors in road projects.[271] Transportation projects are prone to incidents involving personal injury.[272] Accidents involving deaths, injuries, and damage to the environment (as might happen in multi-vehicle collisions or crashes with trucks carrying hazardous materials) may result in sizeable financial losses to the private partner.[273] Concerns about tort liability can affect the structuring of public-private partnerships. For example, the Government Accountability Office found that ownership of SR 91 was returned to the State because the private partner did not want to assume the tort liability for operating the toll road.[274] Because of tort liability, transactions may have to be structured in a way that does not produce the greatest public advantage.
Tort liability may be a barrier to public-private partnerships because the private sector is not shielded from tort liabilities in the same fashion as the public sector.[275] The private partner may be subject to claims for damages related to flaws in the design and operation of the partnership facility.[276] Such claims pose a substantial risk to the finances of the enterprise.[277] Since the public partner is usually protected by sovereign immunity, liability is typically limited by State tort claims law. Additionally, the public partner is protected because it operates a large system of roads over which to spread the risk, and has the general revenues of the State as reserve against any potential judgment.[278]
Ways to help mitigate these risks range from broad options, such as some form of State or Federal sponsorship or the use of State maintenance and police services, to build transfer operate (BTO) agreements, to insurance.[279] The California toll roads have dealt with this problem by turning ownership and operation of the roadway over to the State once the road was open to traffic under a BTO agreement.[280] That way, responsibility for unsafe conditions or other factors leading to the crashes falls on the State-not on the private investors.[281] If subject to damage claims, the private partner also can seek protection by insurance.[282] However, the insurance costs can be significant and could undermine the project's financial feasibility.[283] Private companies have a strong incentive to avoid bearing the risk of tort liability, and this crucial barrier must be overcome through negotiation and risk sharing.[284]