Manufacturer's Liability
Copyright 1992 By Jalexson
originally published on Mediard
The procedure for compensating those who have
been injured using manufactured goods needs to change from a judicial procedure
to an administrative one. The current system forces manufacturers to pay
excessive costs and can delay compensation payments for years. Manufacturers
have to pass their costs along to customers with the resultant increase
in prices discouraging sales. Manufacturers have no incentive to improve
the safety of products under the current system because the system provides
no guarantee that product improvements will reduce legal costs.
Manufacturers should have to provide some form
of compensation to those suffering a loss from use of imperfect products.
Failure to require compensation can encourage the unscrupulous to sell
products they know are defective and force some unlucky customers to in
effect pay much more for some items in the form of medical or other costs.
However, forcing manufacturers to pay excessive costs can increase the
price of some items to the point they cannot be manufactured at a profit.
Increasing the cost of new products too much can force consumers to have
to continue using older products that may be less safe because parts have
worn out. An effective compensation system would help manufacturers balance
the cost of a given product safety improvement with the cost of compensating
those who suffer injury because the improvement is not available.
Only the legal profession really benefits from
the current system. The U.S. legal system's overreliance on judicial opinions
rather than statute law further complicates the situation. What the law
means can vary according to the whims of individual judges and to temporary
majorities on the U.S. Supreme Court. The resulting uncertainty about what
the law is encourages a manufacturer's attorneys to argue that the client
is not legally responsible for losses suffered by a customer. This uncertainty
encourages attorneys suing manufacturers to claim manufacturers should
have to pay for damages even under conditions when products have been altered
or users are intoxicated.
Customers do not benefit from the current system
because they often must sue to receive compensation from manufacturers.
Successful lawsuits may take many years because of court schedules and
appeals of court decisions. The resultant decision may depend more on the
relative persuasive abilities of the competing attorneys and expert witnesses
than on the relative merits of the evidence itself.
Liability for damages should shift from a judicial
approach to an administrative approach based on an insurance or warranty
program. For products sold after start of the program, the purchase price
would include purchase of insurance to cover any damages the purchaser
might suffer during normal use of the product. For previously sold products,
an insurance premium might be collected at the time of resale, the manufacturer
might purchase coverage on behalf of such customers, or customers might
purchase individual coverage. Product owners suffering damage from use
of the product would file an insurance claim for compensation rather than
dealing directly with the manufacturer or hiring an attorney and waiting
many years for a trial.
If product owners have other health insurance,
the health insurance company would file against the product insurance fund
for reimbursement for medical costs paid by the health insurance policy
as well as for compensation for the policy holder for medical or other
costs not covered by the health insurance policy. The current system irrationally
allows an individual to seek compensation for medical bills actually paid
by a health insurance company. This practice has helped increase the nation's
health care costs.
Requiring the customer to purchase insurance
with a new product might increase the cost of some items. Frequently sued
manufacturers, such as aircraft makers, might find they could offer lower
prices because of the reduced cost of handling claims and elimination of
large law suits. Purchasers of some products might face a higher initial
purchase price, but avoid insurance or other costs later on.
Extensiveness of the coverage would vary according
to the type of product and the conditions under which damages normally
occur. If damages normally occur in accidents involving only the user/owner
or those with the user, the insurance program might provide complete coverage.
For motor vehicles and other products that normally produce damages in
accidents involving more than one user, complete coverage might require
purchase of supplemental insurance. Alternatively, manufacturers of such
products might pay into a fund that would compensate auto, health, and
other insurance companies to compensate for products related losses.
Initial cost of insurance would
reflect estimated damages suffered from using the product. The past damage
history of the type of product and engineering data about specific new
models would be used to produce these estimates. A manufacturer could be
assessed additional charges if subsequent problems with the product indicated
the manufacturer underestimated potential damages or failed to recognize
and correct product defects. This provision would encourage manufacturers
to identify potential problems in advance and correct subsequent problems
before damages occur.
Manufacturers failing to provide accurate data
to the insurance agency might be subject to financial penalties. Additional
penalties might be imposed for failing to provide customers with adequate
information about potential hazards.
Full coverage for products requiring regular
maintenance might depend on performance of such maintenance. Companies
performing this maintenance might collect a small amount to retain full
coverage for aging products and avoid liability for damages involving maintenance.
This approach would provide a greater incentive
for manufacturers to improve the quality of their products because safety
improvements would reduce accident insurance costs. Engineering data and
compiled data from accident reports would provide an objective method of
evaluating the effectiveness of safety improvements. The wide variation
in standards among different states and among courts within the same state
provides no guidance to manufacturers about which improvements, if any,
would actually reduce accident related legal costs, particularly considering
the ability of the courts to arbitrarily assign a level of punitive damages
after the fact.
The Constitution prohibits ex post facto criminal
laws that allow government to set a punishment for an action after the
action occurs. A similar provision is needed to prohibit assignment of
punitive damages in civil cases unless the legislative branch of government
has previously established the potential degree of punishment. Manufacturers,
or others being sued, cannot act to avoid punitive damages under the current
system because they have no way of knowing what the punishment will be
or what actions to take to avoid punishment.
Under the current system someone can sue an
aircraft manufacturer for damages from a crash involving a drunken pilot,
but cannot sue the manufacturer of the alcohol that made the pilot drunk.
An aircraft manufacturer can be sued for a crash in which the plane was
flown contrary to that recommended by the manufacturer. However, someone
who uses tobacco products in the manner recommended by the manufacturer
may be prohibited by federal law from seeking compensation for tobacco
related diseases.
The new system could require that alcohol manufacturers provide compensation for those suffering injury as a result of the action of individuals under the influence of alcohol and require that tobacco manufacturers compensate customers(or their health insurance companies) who contract tobacco related disorders. Shifting health care costs to the products causing health care problems could thus help reduce overall health care costs.
I also write at Mediard
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