Who should be liable for a faulty product?
No area of civil law today is more confusing, costly, or counterproductive than product liability law.
When a consumer is injured as a result of a faulty or defective product and attempts to sue, he enters a legal quagmire. Product liability law is a crazy quilt of 50 different jurisdictions with conflicting and ever-changing rules. It has become increasingly difficult, without expensive legal help, for a consumer to know his rights - or for a manufacturer to know his legal obligations.
Over the past 10 years, the product liability field has exploded with an outpouring of lawsuits and court decisions. In the past five years, the number of product liability cases in federal court has tripled.
The result? A lawyer's paradise. Complex product liability laws and precedents spur lengthy litigation over which principles should apply in each case considered, and the accompanying legal costs can be exorbitant. For every 66 cents consumers receive in liability judgments, lawyers make 77 cents in legal fees.
Who pays the bill? The consumer does, when stiff product liability insurance fees are passed on in the form of higher retail prices. Product liability insurance rates are high because they are set on a national basis and must cover all the vagaries and extremes in product liability case law. An unexpectedly costly court decision in Los Angeles can raise insurance rates nationwide.
The differences in liability from state to state are striking. In Illinois, for example, if you drive your construction crane into a power line, you can collect damages from the cranemaker. In Minnesota and New Mexico, the courts have ruled that the hazard of driving a crane into a power line is obvious, and you can't collect anything.
A manufacturer may also find itself liable for injuries even when a product is misused by a consumer. A couple of years ago two men stuffed a hot-air balloon into a commercial clothes dryer and the dryer blew up. They collected about $300,000 in damages from the company that made the dryer. In a number of states, a wholesaler-distributor can be dragged through the courts even though he did nothing to cause the plaintiff's injury, and even though the manufacturer will, in 95.4 percent of the cases, cover the final judgment.
The consumer pays again when product innovation is stifled. Companies hesitate to introduce new products because of the potential liability costs involved. They also think twice about improving products already on the market, fearing that the changes will be used as evidence that the earlier models were defective. In California, New York, and Alaska, the fact that a manufacturer has made modifications or improvements in a product can be used to support the contention that the earlier model wasn't safely designed.
This status quo is undesirable for all concerned - the consumer, the manufacturer, the insurance industry. There is a growing consensus that federal legislation is needed to bring uniformity and certainty to the law and to stabilize what has become a serious burden on interstate commerce. Several states have attempted to solve the product liability problem, but manufacturers marketing products nationwide are still forced to insure against lawsuits which may arise in any state, all of which have different laws. A single state cannot deal effectively with a nationwide problem.
On June 16, I was joined by Senators Stafford, Glenn, Garn, Inouye, Lugar, Abdnor, and Percy in introducing the Product Liability Act of 1982, which would set fair standards of liability for manufacturers nationwide. The purpose of this legislation is threefold:
* First, the bill will reduce the cost of bringing and pursuing a valid claim. It is simply wrong that 77 cents in legal fees must be spent for a consumer to recover 66.
* Second, the bill encourages the manufacture and sale of safe products. This is accomplished by clearly placing the responsibility for harm or injury at the door of the party which caused the harm.
* Third, the bill provides clear and reasonable guidelines so that all parties can identify their legal rights and obligations.
My bill would not create a new layer of federal bureaucracy, nor would it require the expenditure of additional federal funds. The new standards would simply be applied in already existing state and federal judicial systems. Extensive congressional hearings have been held on this issue, and Senate committee action is scheduled for late July or early August.
Who knows? This may be the year Congress decides to take the windfall out of product liability law, and put some equity, certainty, and common sense back in.