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Uniform standards are needed for determining product liability.

Sellers beware: a hostile environment awaits among users of your products. The courts, legislatures and regulatory agencies protecting consumers appear to have developed a growing willingness to "sock it to" product manufacturers and marketers.

Your product-oriented decisions, as a consequence, must consider these attitudes, which transfer loss by consumers to you, based on little--if any--concept of fault.

The argument is simple: If an individual suffers a catastrophic injury, it is fairer to pass on the cost to the manufacturer, who will spread it among other consumers. As a result, you are being held liable in situations which, 20 years ago, would have been dismissed summarily.

A flood of decisions that have weakened or wiped out long-recognized principles holding that, without real fault, liability could not be imposed, has been the effect of this trend.

In the seven years ending 1981, the number of product liability suits filed in federal district courts grew at an annual rate of 28%. That was almost three and a half times faster than the average annual increase of civil suits filed in federal courts.

At the same time, enormous judgements have been imposed on manufacturers and marketers whose actions, until recently, were understood and accepted as based on the principles of fair play and justice. Losing a verdict today can be catastrophic for a smaller company.

As a trial lawyer spending most of my time defending manufacturers against product liability suits, I can assure you that judgments have escalated much faster than in other types of litigation. The wildest illustration to date was the jury award of $128 million against the Ford Motor Company in a case involving a gasoline-fed fire arising from a collision in which a Pinto automobile was struck in the rear. The award was later reduced to $3.5 million by the court. And General Motors Corporation recently received judgements of almost $9 million in two cases. This excluded the legal costs, which are enormous and rising. Insurance Woes

Although it is vital, insurance has grown so terribly expensive that some companies have chosen to "go naked"--dropping their policies. One can understand this in the face of evidence submitted to a U.S. Senate subcommittee in March 1982. A small manufacturer of machine tools reported that its liability insurance premium rose from $200 per machine in 1970 to $11,000 per machine 12 years later. Some companies have dropped product lines involving some potential of personal injury rather than run the risk of staggering damage awards.

In addition, much unproductive time is demanded of corporate executives and technical people to defend against such suits. Typically, once a suit is filled, a very extensive discovery process is undertaken. All parties must respond to myriad--and often irrelevant--interrogatories and depositions. Production of voluminous documents is part of the preparation for and the conduct of a trial. Even if the defense is successful, there is no compensation for expenses and the wasted time of personnel. Being Prepared

Larger companies, including pharmaceutical and auto manufacturers, must maintain large and expensive departments of attorneys, engineers and other experts and support personnel just to defend against product liability claims. A product has to be shown to be defective to prove liability. A defect has been legally defined as anything wrong with a product that can cause harm. Another definition mandates that some element of the product does not meet the reasonable expectations of the ordinary consumer.

Or a defect can be something omitted form the product, or something that should not be a part of it. Either application relates to original design of manufacturing errors, packaging, misleading or inadequate warnings, instructions and literature.

Manufacturers are also obliged to anticipate and guard against foreseeable alterations, even misuse after the product is beyond its control. They could be caused by a malicious third party, mishandling or negligence.

Existence of a defect is not sufficient by itself. There are three categories of liability: negligence, warranty or strict liability.

Negligence is the failure to use the care of a reasonable and ordinarily prudent manufacturer or marketer. Probably the oldest and best known concept of product liability, negligence requires the injured person to show that more than just a defect existed. It must be proved that the manufacturer failed to exercise reasonable care.

There are two types of warrantly liability. Express warranties are usually straightforward product descriptions. They promise that a product will perform specific functions. An express warranty for a food product, for example, usually states that the food is pure and unadulterated.

Implied warranties, as the term suggests, arise from actions of the seller, or circumstances imposed by law, rather than the spoken or written word. The two types of implied warranties are for "fitness' and "merchantability."

A fitness warranty is attached to products for which the particular purposes of the buyer are known to the seller. The buyer relies on the seller to select the appropriate commodity to serve buyer needs.

A warranty of merchantability requires that the product is fit for the ordinary purposes for which it was made; that the product conforms to promises and statements on its labels and will meet the reasonable expectations of a buyer.

Strict liability is imposed on the manufacturer and marketer if the product can be shown to have been unreasonably dangerous when sold. Because it is a concept of liability without fault, strict liability enables injured parties to recover damages without proving the defendant negligent.

Because food products can be spoiled or impure through no fault of the manufacturer or seller, the law allows courts and juries to assign liability even though no fault nor lapse of conduct has occurred.

Application of strict liability has been a matter of discussion for years. Some contend that it is only an expansion of common law. Others term it judicial legislation, which has made for sweeping changes in the relationship between producers and consumers. Still others suggest it is a liberal social policy designed to protect people from their own follies.

Whatever its label, strict liability places the burden of the inevitable costs of society on those best able to bear it. In this view, the manufacturer or distributor is assigned liability because business is better able to administer risk--by passing it along to all its customers--than is the injured party. Possible Defenses

Unfortunately, this trend has changed some basic considerations. The question is no longer, "Whose fault is it?," but, "Is there a condition of the product that creates unreasonable dangers or hazards?"

Several defenses to claims of product liability are available. One is industry practice. The defendant can argue that it followed the practices of its industry, and that its actions were no different from those of other companies.

Assume, for example, that there was no practice or policy in the drug industry to package products in tamper-resistant containers, or to call attention on product labels to tamper-resistant features. Is this industry norm a defense? Could counsel argue that because no other manufacturer does what it is claimed a defendant should have done in this instance. It should not be found liable?

Industry practice is admissible as evidence. But it is not a defense unless the jury agrees that the practices--or their absence--do not make the product unreasonably dangerous. The jury could conclude that the entire industry is wrong, and find for the plaintiff. Although not an absolute, compliance with industry practice can help, for it alerts the jury to the defendant's efforts to keep up with recent developments.

Compliance with federal regulations offers pluses and minuses. A finding of non-compliance with a regulation is seriously, if not fatally, damaging. Such regulations are, however, considered minimum standards. To constitute a defense, the defendant needs to convince jury members that they represent the care that a reasonable and prudent manufacturer would put into its product.

What happens when a consumer misuses a product? An "unforeseeable intervening cause" may offer an effective defense. Whoever tampered with the Tylenol containers in Chicago probably provided just that for the ultimate purchaser. But only the jury decides the most crucial element, whether the incident was "reasonably foreseeable." If it is found that the product misuse, however extreme, was within the area that should have reasonably been foreseen by the manufacturer then misuse is not a defense.

Product liability issues, cases and judgments could be reduced dramatically if definitions were more precise. Can we agree on what is "reasonable," "reasonably prudent," "reasonably foreseeable," "with reasonable care?" It would really help.

You must anticipate, guard and warn against what is reasonably foreseeable under the law. This includes the duty of preventing and intervening misuse or abuse, if reasonably possible. But there is no requirement to guard against the bizarre.

Most people consider the Tylenol incident bizarre. But a plaintiff's attorney could develop historical and statistical evidence from similarly questionable circumstances in other industries to persuade a jury that tampering was reasonably foreseeable. Internal memoranda, and correspondence referring to the possibility of something like it happening could support plaintiff arguments. The Jury's Dilemma

Juries are called on to balance several factors when considering reasonably foreseeable circumstances. These include:

* The likelihood of something similar happening again.

* The kinds of harm likely if the incident recurs.

* How these balance against the cost of guarding against them.

* The feasibility of guarding against such incidents.

Twenty-eight states have reformed their product liability laws. But no two are alike. In one, the law is called "comparative fault." It involves parceling out responsibility among all involved parties. That could reduce the size of an award to the extent that the product's user was felt to be at fault.

No-fault product liability offers a reasonable alternative. This would permit a party to collect if it could show that a product caused an injury, regardless of carelessness by the plaintiff or a defect in the product. The judgement would cover out-of-pocket expenses. But there would be little or no compensation for pain and suffering.

Lawyers who represent claimants oppose such a system. This is not surprising in light of estimates running as high as 40 cents of every dollar awarded to plaintiffs in product liability suits going toward the payment of contingent fees of their attorneys.

Nationwide, uniform standards are needed. Almost anything is preferable to the current situation, in which judgements are based on local and regional law. Pending legislation before Congress offers a start. If it advances, the present hodge podge of laws can be replaced, and those making and marketing products distributed in many states will benefit.
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Author:Barrett, Charles F.
Publication:Progressive Grocer
Article Type:column
Date:Feb 1, 1984
Words:1753
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