Product Liability Reform: Boondoggle or Boon? Backers of Reform Say Lawsuits Are Harming Businesses and Consumers; Opponents Say They Are the Only Way to Hold Manufacturers Accountable
Paul R. Huard. Paul R. Huard is senior vice president of Manufacturers ., The Christian Science Monitor
SEVERAL years ago, someone voluntarily helping to lower the American flag was injured when a gust of wind caught the flag and threw him into the air. He sued a manufacturer of large flags.
The manufacturer settled out of court for $6,000 -- even though he hadn't made the flag. It was cheaper and less time consuming to settle than to get the case thrown out of court.
One of our members, Federal Signal Corporation in Oak Brook, Ill., a manufacturer of fire engine sirens, is giving new meaning to the phrase "damned if I do, damned if I don't." The company recently was sued for more than $50 million because its sirens are too loud. Meanwhile, it is fending off another lawsuit claiming its sirens are not loud enough.
Or consider: The University of Idaho spent thousands of dollars fending off a lawsuit from a student who fell out of a window while "mooning" students below. The threat of ruinous lawsuits, even from pranks like this, boosts by 20 percent the cost of a standard 8-foot aluminum ladder and by 50 percent the cost of a football helmet.
Our out-of-control legal system is a tragedy. Political contributions from trial lawyers and a slick public relations campaign that distorted the truth under the guise of maintaining the rights of citizens to sue "greedy" corporations have maintained the status quo. The reality is that the current system only benefits greedy trial lawyers -- who typically scoop up 50 percent or more of the final award. Everyone else pays the costs, in the form of higher prices, less innovative products, and fewer jobs.
Although often shrouded in out-of-court settlements, the overall costs of product liability for firms range up to $130 billion annually. A recent study in Texas said that lawsuit abuse costs each household in the state $2,700 per year. Similar studies nationwide put the cost at $1,200 for every consumer in America.
But the biggest cost to consumers is largely hidden. In a 1993 survey of members of the National Association of Manufacturers, respondents identified more than 100 products that were withheld or delayed because of liability concerns. Products ranged from aircraft engines and automobile airbags to wheelchairs, medical instruments, and rehabilitative exercise equipment. Even current national priorities like fighting AIDS are affected. Increasingly, manufacturers are tempted to forgo product safety improvements for fear that existing designs will be seen as unsafe and lead to lawsuits. …