This article concerns the preventive effects of medical liability. On theoretical grounds it is argued that medical liability does not necessarily lead to a socially optimal level of precaution, because the incentives are distorted in various ways. Since the 1970s, US states have enacted a variety of reforms in their tort systems. This variation has provided highly useful data for empirical studies of medical liability issues. For one thing, it has become clear that only some 2% of the patients with negligent injuries gets compensation. The empirical evidence nevertheless suggests that medical liability pressure does affect the behavior of healthcare providers to some degree. It has a negative effect on the supply of services, and it encourages the ordering of extra diagnostic tests. At the margin, medical liability law does seem to have some social benefits that offset reasonable estimates of overhead and defensive medicine costs.