Markkula Center of Applied Ethics

Who Should Pay?
The Product Liability Debate

By Claire Andre and Manuel Velasquez

In 1977 Esther Kociemba began wearing the "Cu-7," a copper intrauterine contraceptive device (IUD) manufactured by G.D. Searle & Co. A year and a half later, hoping to become pregnant, she removed the device only to find she had become infertile. Doctors blamed her sterility on pelvic inflammatory disease (PID), a condition frequently associated with the use of IUDs. Kociemba hired a lawyer and brought a product liability suit against G.D. Searle, stating that the company should be held liable for her infertility. The company countered that PID was also associated with certain sexual activities, activities in which Kociemba might have engaged. In addition, corporate representatives said that the risks of IUDs were well known to her doctor. Therefore, the company asserted, she and her doctor should be held responsible for her injuries.

Every year, 34 million people are injured or killed as a result of product related accidents. Such injuries are the major cause of death for people between the ages of 1 and 36, outnumbering deaths from cancer or heart disease. The estimated cost of these injuries is $12 billion annually.

Tens of thousands of product injury lawsuits are filed each year. As the number of claims has risen, so too have the number of companies forced to file bankruptcy because of massive suits. Moreover, an increasing number of companies are claiming that they have pulled established products off the market and halted research on promising products for fear of liability.

Manufacturers claim that they are victims of a system gone haywire. According to strict liability laws, a manufacturer can be held liable for injuries even when he or she had no way of preventing those injuries. Holding manufacturers responsible for injuries caused by products known to be defective or potentially dangerous is one thing, but today manufacturers face lawsuits--often bordering on the outrageous--for injuries they could not have prevented.

Consumer activists, on the other hand, claim that the threat of product liability suits forces manufacturers to make product safety a priority and that those who suffer injuries caused by products should be compensated for their injuries by the manufacturers of those products.

Product injuries represent a major cost of introducing products into a society. Since virtually every new product carries some unknown risk, a possibility always exists that the product may cause injuries or impose other costs on users. This raises an important moral question: How should these costs be distributed among the members of our society?

Should Consumers Bear More Responsibility?
Manufacturers contend that consumers should bear more responsibility for product injuries because the costs of placing full liability onto companies far outweigh the benefits. Since the 1960s, there has been a steady increase of product liability cases. According to one study, 13,500 product liability suits were filed in federal court in 1986, compared to only 1,500 in 1974. Due to this barrage of litigation, the cost of doing business has risen dramatically. Insurance premiums have skyrocketed, where insurance is available at all. Manufacturers' legal costs have also soared: about 60% of the average corporation's litigation expenses today are product liability cases. The rising cost of product liability insurance and lawsuits has led, in turn, to great increases in consumer prices.

The economy also has suffered from the boom in product liability claims. When companies facing massive lawsuits have been forced to scale down their operations, the result is a loss of jobs. In a recent report by the Conference Board, 15% of corporations surveyed had laid off workers because of product liability costs, while 8% had been forced to close plants altogether. In addition, the threat of liability has affected American businesses' ability to compete internationally. In other countries, there are severe limits on what manufacturers can be held responsible for and there is less tendency to sue. By not having to contend with a morass of lawsuits, these companies can offer cheaper products, and put American manufacturers at a competitive disadvantage.

It is also argued that the fear of being hit with a liability claim keeps many lifesaving drugs and devices off the market, and stifles creativity and innovation. Even the most rigorous conformity to safety regulations doesn't prevent liability. One report found that 39% of the companies surveyed delayed introducing new products or had discontinued products because of product liability suits. The pharmaceutical industry has been hit the hardest. Only one company in the U.S. now manufactures vaccines, a product often targeted in lawsuits. Vaccines for AIDS will certainly not reach the market without protection against lawsuits. Said one spokesperson from the drug industry, "Decisions [are] already being made on [AIDS] research priorities for liability reasons."

The costs to manufacturers and to society will only increase as technologies grow more complex and their applications more varied. Testing products for safety under every possible condition of use will not only impose great testing costs on manufacturers but will result in enormous delays in the introduction of new products that could benefit society.

Manufacturers also maintain that it is morally unjust to hold someone liable for injuries that he or she could not have prevented. Through extensive research and repeated testing, companies do all that they possibly can to ensure product safety. And, to prevent harm, warnings and instructions are plastered over each piece of merchandise.

Finally, some manufacturers point out that in a free market system, businesses have the right to make and sell whatever products they choose and consumers have the right to choose what they buy. But rights carry with them responsibilities. When consumers choose to buy risky products rather than safe ones (both of which businesses may offer in a free market) or when they choose not to inform themselves about products, they must accept the consequences, including the responsibility for any injuries resulting from those choices.

Should Manufacturers Bear More Responsibility?
Those who hold that manufacturers should bear more of the responsibility for product injuries argue that the benefits of holding companies liable for these injuries outweigh the costs. In a recent year, more than 200,000 infants were hospitalized for injuries resulting from the use of toys, or nursery or recreational equipment. About 1,777,000 people required emergency treatment because of injuries involving home furnishings; more than 1,200 of these injuries were fatal. An additional 1,782,000 individuals required treatment for injuries involving home construction materials; 1,300 of them died from the injuries. Society has an obligation to minimize such tragedy and suffering. Without the threat of liability, manufacturers would have little incentive to ensure product safety, and the number of product-related injuries would escalate.

The costs of holding manufacturers responsible for product injuries are not as great as company representatives would have us believe. For example, the so-called "explosion" in product liability suits, "crippling American business," is a myth. A recent study by the RAND Corporation found that although the number of product liability lawsuits had increased nearly eight-fold during the last decade, more that half of these lawsuits involved only a handful of companies, reflecting mass litigation against a few asbestos and pharmaceutical companies. A report by the Government Accounting Office also concluded that, except for cases involving a few drug or asbestos companies, product liability suits "do not appear to have been rapidly accelerating or explosive."

Furthermore, it cannot be claimed that product litigation makes domestic companies any less competitive internationally. Foreign companies that sell in the U.S. have to abide by the same product liability laws that American companies face. And when American companies compete abroad, they have the same advantages that foreign companies have.

Those who hold manufacturers liable for product-related injuries also claim that justice is on their side. Since the defective product that caused the injury was produced by the manufacturer, it is fair that the manufacturer bear the costs of that injury. Moreover, they argue, justice requires that the party that is most able to pay for an injury be the party that bears most of the financial burden. Manufacturers know in advance that there is always a risk of liability in introducing new products, and can therefore build the cost of potential lawsuits into the price of those products. Manufacturers also have the research expertise and laboratories, the engineering and technical knowledge, and the budgets to assess the risks of product use and to ensure that these products are safe. Consumers lack these. It is just to place greater burdens on those who are better able to bear these burdens.

Consumer activists also challenge the corporate claim that consumers "freely" choose to buy unsafe products. Consumers, they argue, are woefully uninformed about the products they buy because they don't have access to information about the products. Others lack a comprehensive understanding of the seriousness of the printed warning. Still others may be functionally illiterate or too young to make informed choices. It is manufacturers, not consumers, who make the "free" choices to compromise product safety and it is manufacturers who must therefore accept the consequences.

As long as products are produced, product injuries will occur. Who should bear the costs of those injuries? Our answer requires that we weigh the claims of consumers against those of manufacturers--claims which appeal, in different ways, to our desire to minimize harm, our ideal of justice, and our commitment to taking responsibility for the choices we make.

Further reading

Andrew Eiler, The Consumer Protection Manual (New York: Facts on File, 1983).

Peter Huber, "Are We Afraid of the Future?" Reader's Digest, Vol. 133 (December 1988), pp. 191-2, 194.

Peter Huber, "Litigation Thwarts Innovation in the U.S.," Scientific American, Vol. 260 (March 1989), p. 120.

Deborah Johnson, Computer Ethics (Englewood Cliffs: Prentice Hall, Inc., 1985), pp. 39-55.

Catolyn Lockhead, "Liability's Creative Clamp Holds Finns to the Status Quo," Insight (August 29, 1988) , pp. 38-40.

"Unsafe Products: The Great Debate Over Blame and Punishment," Business Week (April 30,1984), pp. 96-104.

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