ISPA Position on
Product Liability Reform

Issue:
Product liability claims pose obstacles to manufacturers.

Importance:
Product liability claims are rapidly increasing in both size and number.   Tort costs in general rose 100 fold from 1950 to 2001 to $205 billion (and by 14% in 2001 alone).  In addition to out-of-pocket costs for legal representation, judgments, settlements, and higher insurance premiums, product liability claims also impose opportunity costs, diverting funds from capital improvement projects, research and development, worker training and hiring.  Litigation risks also discourage manufacturers from introducing new products.

ISPA’s Position: 
ISPA supports product liability reform.   The object of these efforts is not for manufacturers to escape responsibility when there is true injury, but to require courts and juries to award reasonable damages, rule on claims in a more predictable manner, and prevent abusive lawsuits.   

Background:
A number of factors contribute to increased product liability claims.   For example, current rules allow plaintiffs to “forum shop” by suing manufacturers in states with laws and juries that favor large judgments.  Many states impose no limitations on the amounts juries may award for “pain and suffering” and punitive damages, and disregard the harm that plaintiffs often cause themselves by misusing products.  Other states have draconian “joint and several liability” rules that can make each defendant in a product liability case potentially responsible for the full damages awarded by the court if the other defendants cannot pay, regardless of an individual defendant’s degree of responsibility for the plaintiff’s injuries.  As a result, manufacturers are increasingly forced to settle out of court rather than risk a damaging jury verdict. 

ISPA Action:
The business community is attempting to reform these rules.   ISPA – working through broader industry groups including the National Association of Manufacturers – supports these reform efforts, which include:

Caps on Damage Awards:   Excessive damage awards can be detrimental to manufacturers, especially smaller businesses.  ISPA supports efforts to cap product liability awards at $250,000 against small businesses.  Large companies could be limited to the greater of $250,000 or twice the total economic and non-economic injuries suffered. 

Apportion Damage Awards According to Fault: The current system of joint and several liability unfairly makes one manufacturer that bears only slight responsibility for a plaintiff’s injuries potentially liable for the full award.  Apportioned damage awards would address this disparity by making each defendant’s share of an award commensurate to its level of responsibility for the resulting injuries.  Apportioning damage awards would also reduce the pressure that a manufacturer with little responsibility for a plaintiff’s injuries now faces to avoid the risk of being held solely responsible for a massive jury award by agreeing to a large settlement.

A Uniform National Statute of Limitations:   The amount of time after an accident that an injured person has to file a lawsuit (called the “statute of limitations”) varies from state to state.  This inconsistency encourages “forum shopping,” contributes to the unpredictability of product liability rules and can place defendants at a disadvantage as evidence and witness accounts become stale over time.  ISPA supports a uniform national 2-year statute of limitations that would require an injured party to initiate legal action within 2 years after the injury has been discovered.  This would provide ample time for injuries to be identified and investigated.

Standard of Repose:   Related to the statute of limitations concept, a “statute of repose” would bar persons injured by products from filing lawsuits to recover damages if the product in question is beyond a certain age.  For example, if the statute of repose is 15 years, a person injured by a 20-year old product could not sue the manufacturer for damages.  Such a rule would recognize that manufacturers should not be held liable for the performance of their products when they are used well beyond their intended lifespan.  At present, some states have statutes of repose, but the repose periods vary from one state to the next, and many states have no repose period at all.  ISPA supports legislation that would set a uniform national statute of repose of 15 years.

Consumer Responsibility for Product Misuse and Alteration:   Manufacturers should not be liable for injuries caused when consumers misuse or alter their products.  ISPA supports legislative efforts that require courts to take individual responsibility into account in determining whether a manufacturer is liable for a consumer’s product-related injuries. 

Legislation:   In 1996, President Clinton vetoed the “Common Sense Product Liability Legal Reform Act,” which contained many of the actions listed above.  The “Small Business Liability Reform Act” (S. 1546 and H.R. 2813) was introduced in the summer of 2003 and addresses many of these concerns, but is limited in scope to small businesses.  ISPA believes that a comprehensive federal product liability reform standard is critical to allowing injured parties to be compensated while protecting manufacturers from excessive penalties and unwarranted lawsuits.    

Product liability reform will be most effective if it occurs in a uniform national manner.   Nevertheless, in the absence of comprehensive federal legislation, the following are several relevant proposals that state legislatures are considering:

Iowa:   HJ 603 would protect manufacturers from being held liable when the injured party failed to follow obvious safety precautions.  It also exempts manufacturers from liability if the product can be proven to conform to the state of the art.  

New York:   A00140 would amend New York’s joint and several liability rules to limit the total liability of a defendant that is found responsible for 50% or less of the economic or non-economic injury to that share of the award. 

Oregon:   H.B. 2080 would set (A) a 2-year statute of limitations starting when the plaintiff discovers a connection between a product and an injury or damage, and (B) a 10-year standard of repose.