Products Liability
John J. McCall
Is an area of law determining the conditions under which a manufacturer/seller is required to provide financial compensation for injuries caused by defective products.
Prior to the industrial revolution, products liability law was effectively governed by a principle of caveat emptor (‘‘buyer beware’’). That principle precluded injured consumers from ever recovering damages in court. At the beginning of this century, the ruling legal doc trines were a conjunction of privity of contract and negligence. The privity doctrine allowed consumer suits only against parties with whom they had direct contractual relations; this requirement effectively insulated manufacturers from suits, since manufacturers were removed in the chain of distribution from the end purchaser. The negligence standard required that successful consumer suits had to prove the defendant seller was negligent for letting a defective product into the marketplace. (A defective product is one that is judged to be ‘‘unreasonably dangerous.’’)
In 1916 a New York court case, McPherson vs. Buick Motors, eliminated the privity requirement and thus exposed manufacturers to in creasing numbers of product liability suits. Other state jurisdictions gradually followed New York’s lead in establishing simple negligence as a standard for manufacturer liability. However, by the 1960s, that standard was challenged as a number of states began to recognize a consumer’s cause of action even in cases where negligence was not established. In California, a 1963 ruling in Greenman vs. Yuba Power Products established a doctrine of strict liability. Under this standard, manufacturers would be held strictly liable for injuries caused by defective products. The plaintiff is under no burden to establish negligence. Strict liability has become the norm for product liability in most states and for most product categories.
The shift to strict liability and away from a negligence standard signifies an important change in the function of product liability law. Prior to the adoption of strict liability, the decision to compensate an injured consumer was, at least arguably, based on a finding that the defendant was at fault and liability could be seen as a penalty for negligent behavior. Once strict liability was adopted, however, the conception of product liability law shifted from a fault finding exercise to an attempt to provide a mechanism of compensation for consumers injured by defective products. The law became a scheme of no fault insurance where the premiums for that insurance are paid by the manufacturer.
An obvious result of the loosened requirements on consumer suits is an increased frequency of consumers bringing suits and recovering damages. This is not to suggest that business is without available legal defenses, how ever. A corporation may block or diminish monetary judgments by showing that consumers voluntarily assumed risk, misused, or were contributorily negligent; or by establishing that the risk of the product is outweighed by its social benefits.
Given the increased financial exposure of corporations under strict liability, it is not surprising that they, and their insurance carriers, lobbied for state and federal legislation to change the law and return to the negligence standard. The arguments used in this lobbying effort raise issues of morality and public policy. Some of the arguments assert that strict liability is harmful to society. Others claim that strict liability is unfair to business because it imposes liability in cases where the business is not at fault. The first line of argument concentrates on the social costs of strict liability. Opponents claim that it has led to an explosion of liability suits and damage awards, with drastically increased insurance premiums. This in turn leads, they claim, to in creased product prices, products being withdrawn from the market, decreased investment in research and development of new products, and depressed employment.
Those favoring strict liability argue (1) the general decrease in accidents because manufacturers have greater safety incentives under strict liability outweighs the other harmful economic effects; and (2) the law can make exceptions for product categories if strict liability leads to the unavailability of socially essential products (as California courts have done for prescription pharmaceuticals).
Defenders of strict liability also respond to the charge that it unfairly imposes liability on fault less manufacturers. Since even opponents of strict liability will accept manufacturer liability where there is negligence, the issue at hand is essentially a question about how to assign the costs for injuries from defective products when no one is at fault. If we abandon strict liability, its proponents argue, and return to negligence, then the full cost of the accident falls on the injured party, who of course bears no responsibility for the defect. They contend that it would be fairer to allocate the cost to a corporation, which is also faultless, because the corporation can spread the cost of the accident broadly among the consumers of its product.
More recently, critics of current products li ability law have abandoned a frontal assault on strict liability and have instead lobbied for more limited policy changes. These efforts have met with some success, as the majority of states have enacted reform legislation since 1995. Recent state legislative actions include a limit on punitive damage awards (usually to a small multiple of compensatory damages); a requirement that a substantial portion of punitive awards be paid to the state instead of the plaintiff; a limit on non economic (i.e., pain and suffering) damages to $250,000; and financial penalties for filing what the court determines is a frivolous suit. These reforms aim to reduce the incentive to bring suits by reducing the potential return to both plaintiffs and their lawyers. A central ethical question concerning these reforms is whether they reduce the financial pressure on business at the cost of denying fair recompense to some worthy plaintiffs.
The current debates over the increased use of class action suits in liability cases, the appearance of suits against gun manufacturers (for negligent marketing leading to injuries caused in crime), and McDonald’s (for obesity related health damage), and the explosion in medical malpractice insurance premiums are just a few of the contemporary developments that assure continued controversy over products liability.
See also compensatory justice; fairness; risk
Bibliography
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