ROANOKE TIMES
Copyright (c) 1995, Roanoke Times
DATE: Monday, December 18, 1995 TAG: 9512180014
SECTION: EDITORIAL PAGE: A-8 EDITION: METRO
SOURCE: MICHAEL J. HILEMAN
MARK WHERRY'S Dec. 5 commentary, "Product-liability reform is key to economic growth," and articles like it that deride product-liability law for being "anti-competitive" frequently cloak themselves in concern for how much of the compensation in these suits ends up in the victim's pockets. Statements such as "most of the money goes to the lawyers" are simply untrue.
Arguments aside about where the money goes, the appeal of these diatribes against product-liability law is ultimately grounded in the fallacious assumption that if industry weren't required to pay compensation to those injured by its products, there would be no cost to society. This assumption is appealing, but its free ride is an illusion. What this assumption fails to recognize is that any time there's an injury, there is a cost - whether in the form of medical expenses, loss of income and the like or merely in the cost of a worthless product. Product-liability law's aim is to decide who should bear this cost.
There are three logical parties who could be made to bear this cost:
One is the injured party under the old common-law rule of caveat emptor. This rule made sense in a time when products were fewer and simpler, and it might be reasonable to expect the purchaser to be sufficiently sophisticated to assess their usefulness and safety. Today it would serve no purpose, other than perhaps to require retailers like Wal-Mart to replace "We Sell for Less" with "Let the Buyer Beware," with the predictably chilling effect on commerce that admonition would engender.
The second party that might bear the cost would be the government. One can well imagine the enthusiasm taxpayers would have for insisting that government regulate industries when the consequences of their mistakes were born by the public coffers. Anyone who is dismayed by the Federal Drug Administration's regulating the pharmaceutical industry wouldn't likely care to see that type of regulation extended to industry in general, with its anti-competitive consequences.
Finally, there's industry. Several good reasons for requiring industry to bear the cost, even when it's innocent of any fault, which is a key ingredient of common-law tort are: Industry had the last best chance to make the product safe; it can be powerfully motivated to change the product so that it's safe in the future or desist from producing it; industry is in the best position to locate and notify purchasers of a product that's unsafe; and, the best reason, industry has profited from the sale of the product.
Be assured that this isn't an anti-profit, soak-the-rich argument. It simply recognizes that because industry has made some money, it's in a position to purchase private insurance against the risk of loss. Insurance brings a private entity motivated by a desire to reduce risk and, in order to charge a premium the industry can afford and from which the insurance company can make a profit, to exercise some supervision over the manufacture and distribution of products through the use of their own engineers or those of underwriting laboratories.
I submit that the private system of regulating industry through the threat of bearing the cost of dangerous products and the consequent involvement of the insurance industry is a goose that's laying a golden egg. Its success is a large part of the confidence that consumers have in purchasing and using a wide variety of potentially dangerous products. While it's not a system that's without cost, it's an elegant and parsimonious system that beggars its alternatives by comparison.
I fully understand Wherry's hostility toward product liability and the lawyers who advance these causes, working as he does for an industry that has recently paid compensation for some truly horrendous injuries. Any system can be improved, but I'm alarmed when people are persuaded to embrace abolition in the name of reform. Perhaps it's time that some of these legal concepts and their underlying rationales be taught as part of the general high-school civics curriculum so consumers can learn to arm themselves against ideas that are so clearly against their immediate and industries' long-term interests.
Michael J. Hileman, of Radford, is an attorney.
LENGTH: Medium: 77 linesby CNB