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The case for product liability reform--now.

American business has been accused of falling behind, but there's one thing we're still better at producing than any nation on earth: costly lawsuits that sap our competitiveness. Yet, if the first step toward solving a problem is recognizing it. we are making progress--there is growing consensus about the dangers of the "litigation monster" we have unleashed.

Vice President Quayle raised the level of debate last year when he asked a meeting of the American Bar Association: "Does America really need 70 percent of the world's lawyers? Is it healthy for our economy to have 18 million new lawsuits coursing through the system annually?"

These are good questions, but I can think of a few more: Why are liability insurance costs in the United States fifteen times greater than in Japan and twenty times greater than in Europe? How long can we expect U.S. businesses to go on absorbing S100 billion in product liability judgments each year? And, what can we do to soothe U.S. business's fears of litigation and its high costs which force companies to abandon new-products and markets'?

Fortunately, we have an answer to the last question, in fact. Congress may soon pass a vital initiative to boost our international competitiveness by reforming our outdated, disjointed product liability laws.

Willi overwhelming bipartisan support, the Senate Commerce Committee approved S. 640. a bill that would remove abuses in our legal system while preserving injured people's right to sue. Its House counterpart has received the bipartisan cosponsorship of 150 representatives.

Both sides in Congress agree on a number of basic principles: Americans are entitled to safe products: manufacturers are responsible for the safely of the design and manufacture of their products: and. when products fail lo perform safely, those hurt should be swiftly and fully compensated.

Despite these agreements, those who most benefit from the abuses in the system--primarily plaintiff lawyers--claim there is no problem with the system. They say lawsuits are necessary to keep business honest and no responsible business has anything to worry about. Yet, a 1988 Rand Corporation study found that 87 percent of all U.S. companies will become lead defendants in a product liability trial at least once! Let's take a hard look at three more of the most cited reasons for maintaining the mess we now have in place:

Mr. Kay is the executive director of the Product Liability Coordinating Committee, a non-profit coalition of over 700,000 small and large American companies. The Product Liability Coordinating Committee is located at 1001 Nineteenth Street North, Suite 800, Arlington, Va. 22209.

MYTH ONE: A single federal product liability law would be an unwarranted encroachment by the federal government on states' rights.

Congress is given the power to enact federal legislation in this area under the Commerce Clause of the U.S. Constitulion. This power was designed for responding to just such a crisis. Yet. today each state and the District of Columbia haves their own unique laws pertaining to product liability. Manufacturers and sellers can be subject to as many as 51 different interpretations of what constitutes a "defective" product or seller negligence and the appropriate assessments for punitive damages.

It simply makes economic sense for the United States lo establish a uniform, national standard for product liability. In the post-Cold War era, all of Europe will have one common product liability law for 320 million people living in 12 member nations and 6 0 affiliate nations. Meanwhile, the United States will lumber under a huge competitive disadvantage if we continue to operate with 51 separate jurisdictions. Studies have shown that our present product liability laws slowdown--and prevent--the development of new and safer products. The United States ends up ceding valuable technology and products to our economic competitors.

MYTH TWO: Product liability reform won't have any effect on our competitiveness because when we are selling abroad we are playing by foreign rules.

The United States is its own biggest market. Last year, total domestic purchases of goods and services amounted to $5.7 trillion while total U.S. exports stood at $573 billion. In other words, some 90 percent of all products manufactured here were sold inside the United States. Yet, because our product liability rules hamper innovation. some of our products don't have the competitive edge thai U.S. business is capable of achieving.

MYTH THKKK: The rate of litigation has been steady over the past couple of years and we should not interfere because the desired result is already being achieved.

This argument conveniently ignores the fact that case filings in federal courts increased over 1.100 percent between 1974 and 1990. This growth together with rapidly rising insurance rales combine to create a liability crisis for all U.S. manufacturers.

The nationwide impact is most profound for small businesses, which are least able to adapt to increased costs, lost insurance coverage, and legal uncertainty. Many simply can't cope with the bewildering array of different state laws, nor can they afford the skyrocketing costs of compliance.

Worst of all, with today's flooded legal system. injured people aren't being justly compensated. It now takes an average of 2 1/2 years before these cases can be resolved, and even then, lawyers wind up receiving the bulk of any compensation awarded.

We expect product liability legislation to move through Congress this year. But it faces a tough battle. Whether it is approved will depend greatly on the involvement of citizens--including the business community--who have had enough of our stalled legal system, want to ensure that victims are swiftly compensated, and are tired of paying extra-high prices for consumer goods.

This is a battle, too for those who want to reverse the increasingly hostile atmosphere for small business, ensure innovation will be rewarded, and improve our competitive position.

But, we won't get anywhere without direct involvement by concerned citizens. It is imperative that support for the bill--H.R. 3030 in the House and S. 640 in the Senate is communicated to congressmen and senators.

If members of Congress know their constituents support this legislation and are personally affected by it, they will join us in supporting these measures.

by William D. Fay
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Title Annotation:OPINION
Author:Fay, William D.
Publication:Insurance Advocate
Date:Apr 10, 2017
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