Reforming Products Liability

by W. Kip Viscusi

Overview

The current products liability crisis is both familiar and puzzling: million-dollar awards for apparently frivolous claims, inadequate settlements for thousands of people with severe injuries, skyrocketing insurance premiums, an overburdened judicial system. The adverse effects of this crisis on product innovation may be particularly detrimental to the extent that they deprive consumers of newer and safer goods. W. Kip Viscusi offers the first comprehensive and objective analysis of the crisis. He employs extensive, original empirical data to diagnose the causes and to assess the merits of alternative reform policies.

Drawing on both liability insurance trends and litigation patterns, Viscusi shows that the products liability crisis is not simply a phenomenon of the 1980s but has been developing for several decades. He argues that the principal causes have been the expansion of the doctrine of design defect, the emergence of mass toxic torts, and the increase in lawsuits involving hazard warnings. This explanation differs sharply from that of most other scholars, who blame the doctrine of strict liability. Viscusi reformulates the concept of design defect, grounding it in sound economic analysis. He also evaluates public policy regarding hazard warnings and proposes a new national approach.

More generally, the author sketches a comprehensive social risk policy, in which tort liability interacts with government health and safety regulation to foster a coherent set of institutional responses to health and safety risks. Reforming Products Liability will be of special interest to lawyers, judges, policymakers, economists, and all those interested in legal policy and health and safety issues.

Product Details

ISBN-13:	9780674753235
Publisher:	Harvard University Press
Publication date:	09/01/1991
Edition description:	New Edition
Pages:	287
Product dimensions:	6.12(w) x 9.25(h) x 1.20(d)

About the Author

W. Kip Viscusi is George G. Allen Professor of Economics at Duke University and Associate Reporter on the American Law Institute tort liability reform project.

Table of Contents

Preface

1. Diagnosing the Liability Crisis

Perspectives on Liability Reform

Recent Trends in Products Liability

Proposals for Reform

2. The Dimensions of the Liability Crisis

Accident Rates Decline, But Litigation Soars

The Surge in Asbestos Litigation

Insurance Industry Trends

Roots of the Insurance Crisis, 1980-1984

Other Economic Effects of Products Liability

The Design Defect Doctrine and Hazard Warnings

3. The Litigation Process

The Overall Structure of Products Liability Litigation

Court Verdicts

Claims Settled Out of Court

Cases That Are Dropped

Using Economic Models to Assess Reform Proposals

4. The Design Defect Test

A Case Study of Risk-Utility Tradeoffs

Risk-Utility Analysis

The Producer as Insurer

Alternative Risk-Utility Measures

On the Threshold of Marketability

Who Decides?

Proposals for Restructuring the Product Defect Test

5. The Explosive Mathematics of Damages

The Insurance Value and the Deterrence Value of Damages

Inflation and the Increase in Verdict Awards

Noneconomic Damages

Has Voodoo Economics Come to the Courts?

Applying the Value of Life: The Ford Pinto Case

Proposals for Setting Damages

6. Regulation of Product Safety

The Adequacy of Incentives

Regulatory Violations and Products Liability Litigation

Restructuring the Institutional Interactions

7. Hazard Warnings

The Objectives of Hazard Warnings

Assessing the Quality of Warnings

Warnings and the Risk-Utility Test

Regulatory Compliance

Toward a National Warnings Policy

8. Environmental and Mass Toxic Torts

The Market Paradigm and Why It Fails

Products Liability—an Inadequate Remedy

Agent Orange and the Economic Stakes of Mass Toxic Torts

Compensation Funds

Strategies for Mass Toxic Torts

9. Workers' Compensation

Lessons from the Workers' Compensation Experience

Job-Related Products Liability Claims and Workers' Compensation

10. Will Products Liability Reform Matter?

Insurance Availability

Products Liability Definitions

State-of-the-Art Defenses

Statutes of Limitation

Collateral Source Rules and Damage Rules

Effects on Premiums

Conclusion

11. A Strategy for Principled Products Liability Reform

Appendix A: Products Liability Costs in Different Industries

Appendix B: The Litigation of Job-Related Claims

Notes

Bibliography

Index

Editorial Reviews

Kip Viscusi presents a careful and compelling indictment of the modern system of product liability law, which skillfully weaves together economic theory, legal doctrine, and statistical and anecdotal evidence. The book should become a standard reference for readers in all relevant disciplines who are interested in the pros and cons of product liability reform.

Richard A. Epstein

The standard view of the products liability crisis, largely based on anecdotal evidence, proclaims that the most important policy goal is to reduce tort claims and insurance premiums. This outstanding book, based on systematic, empirical investigation, tells us how to improve the product liability regime for consumers and injury victims as well as for manufacturers and their insurers.

Paul C. Weiler

The standard view of the products liability crisis, largely based on anecdotal evidence, proclaims that the most important policy goal is to reduce tort claims and insurance premiums. This outstanding book, based on systematic, empirical investigation, tells us how to improve the product liability regime for consumers and injury victims as well as for manufacturers and their insurers.
— Paul C. Weiler

Harvard Law School

Kip Viscusipresents a careful and compelling indictment of the modern system of product liability law, which skillfully weaves together economic theory, legal doctrine, and statistical and anecdotal evidence. The book should become a standard reference for readers in all relevant disciplines who are interested in the pros and cons of product liability reform.
— Richard A. Epstein

University of Chicago
Law School

A comprehensive and objective analysis of the current products liability crisis. Viscusi (economics, Duke U.) employs extensive, original empirical data to diagnose the causes and to assess the merits of alternative reform policies. Annotation c. Book News, Inc., Portland, OR (booknews.com)

Booknews

Kip Viscusi has contributed a good deal to the literature on and our understanding of economics and regulation. REFORMING PRODUCTS LIABILITY is his most recent work dealing with some aspect of the general topic. It sheds interesting and important light on features of the products liability "system," problems and effects of the current judicial system for awarding damages for injuries caused by products, and various policy proposals for producing more satisfactory results. Viscusi's work is not the exhaustive and systematic treatise one might expect. His results do not conclusively establish the policy choices that must be made. However, these results are partially due to the fractured nature of the "system" and the problems it generates. The analysis does contribute greatly to our understanding. Viscusi's thesis is that the traditional legal system has produced a variety of unpredictable and inconsistent results. The author recognizes that this situation is not the result of a single problem, but rather the product of a complex collection of intended and unintended consequences of the "system" under which we operate. The allocative results of the "system" do not achieve the objectives he sets forth for the system -- hence the failure of the products liability system. Regardless of which liability regime the judiciary uses -- negligence, design defect, or strict liability -- or what kind of issue is litigated -- individual damages or toxic tort injury to a class of people -- damage awards are ad hoc, unpredictable and delayed, and do not achieve the appropriate objective through the resulting allocation of resources. Viscusi's goal is (1) deterrence, i.e., the reduction or reallocation of risk at appropriate levels, and/or (2) insurance sufficient to compensate victims. Given these objectives, Viscusi develops a set of analyses to establish the nature and the features of the "products liability crisis" and proposed remedies that some intend to solve the problem. The methodologies Viscusi employs yield interesting and striking results. Although the data are somewhat limited and out-of-date, they contribute a perspective on the nature of the crisis that we have lacked so far. However, some of the data and the analysis suffer from insufficient explanation. Thus, several of the tables do not have adequate textual explanation with the result that their meaning and their significance is unclear (e.g., Tables 2.7 and 3.2). Nevertheless, the data do contribute a good deal because they are new and relevant to the policy debates treated in the book. The documentation in this book is excellent. It is both current and exhaustive. It provides an extensive bibliography for anyone interested in this subject generally or in the particular policy debates that are ongoing about products liability specifi- cally. Page 34 follows: If there is a disappointment with this work, it is the lack of a complete or comprehensive perspective on products liability. Viscusi takes the view that there is a liability "system" but he fails to recognize that its component parts are unique and perhaps non-systemic. There are a variety of explanations for the operation of the current system that may make it more under- standable. However, Viscusi's economic perspective forces one to view the current system as not working (i.e., failing to achieve either social insurance or risk reduction and allocation objec- tives) and as requiring correction. The discussion of pain and suffering damages in Chapter 5 illustrates this problem with his approach. Furthermore, as Viscusi recognizes, there is no single problem or single solution for this subject. All the problems, e.g., mass toxic torts (asbestoses), cannot be treated identically, such as by ad hoc jury damage awards used in a design defect or inadequate hazard warning case. His view of these kinds of problems both restricts the understanding and analysis of products liability issues and it precludes a definitive "solution" to the problems or failures of the system. The recommendations Viscusi makes for correcting flaws in the system are discussed in the last chapter. This presentation provides intriguing and interesting elaborations of some of the issues presented in the book. They provide a set of views about the problems and solutions to the individual and collective inefficiencies that the system produces. The end result of the analysis, however, is somewhat unsatisfactory because of Viscusi's limiting, initial assumptions about the subject.

William McLauchlan