Putting Limits on Liability
PRODUCT-LIABILITY lawsuits pose a severe threat to America's competitiveness, says Edward Goldman, vice president of Foster-Miller Inc.
"My company has refused to accept contracts to build equipment to produce football and hockey helmets, because these products are known as `lawyers dreams,' " Mr. Goldman explained to a Senate subcommittee last fall. Overseas manufacturers are technically liable on product-safety issues. But in practice, Goldman said, they are insulated from lawsuits and are becoming the only source for some products.
The Waltham, Mass., equipment company has joined a concerted effort by United States businesses to pass - after 12 years of trying - a national product-liability law.
Companies pay compensatory damages to victims, and sometimes punitive damages as well, when it is proved that it knowingly sold an unsafe product or failed to warn users of risks.
One case of current interest involves the biggest US computer companies, which are being sued by numerous claimants over injuries allegedly related to use of computer keyboards.
A recent survey by the Conference Board found that 15 percent of US companies have laid off workers as a direct result of product-liability costs and 39 percent have decided not to introduce new products because of liability concerns.
Machine-tool companies, which make equipment used in manufacturing, spend about seven times more on product-liability costs such as insurance and damage payments than on research and development of new products, Goldman noted in his testimony.
Jerry Jasinowski, president of the National Association of Manufacturers, says product-liability reform is one of the most important steps Washington could take to help the economy.
The American Trial Lawyers Association has long argued that reforms would hurt consumers.
This year may be different, says William Fay, executive director of the Product Liability Coordinating Committee, a lobbying group sponsored by major business organizations. Mr. Fay says recognition is growing that a national policy is needed. He notes that the European Community will have a single product-liability system at the end of 1992, while the US still has a patchwork of 50 state laws.
"We want to eliminate the concept of `forum shopping,' " in which lawsuits are filed in states where the laws are toughest, Fay says.
The proposed federal law, with 40 sponsors in the Senate and 159 in the House of Representatives, would include the following provisions:
* There would be no limit on damage awards by juries, a provision once sought by business.
* A case for punitive damages must be proven by "clear and convincing evidence." This is a tougher standard than "preponderance of evidence," which is used in most state laws.
* Suits could not be brought when a claimant's use of illicit drugs or alcohol was determined by a jury to be the primary cause of injury.
* A company could still be held liable for all "economic" damages such as medical bills even if it did not bear complete responsibility for the harm. But awards for pain, suffering, and emotional distress would have to be proportional to a company's responsibility.