Product-Liability System Under Congressional Debate

UNITED States manufacturers have been lobbying Congress for 13 years to reform a product-liability system they say encourages frivolous lawsuits.

Now a bill to modify the ground rules for these lawsuits has finally reached the Senate floor.

Product-liability lawsuits generate more than $100 billion a year in legal costs and judgments. Even when companies win, they lose by paying the huge costs of defense and higher insurance premiums.

Supporters of the current bill say a majority in both the House of Representatives and Senate would vote for the reforms.

But passage by Congress remains far from certain.

The reforms are opposed by some of the most powerful lobbies in Washington - trial lawyers, consumer groups, and elderly Americans. These groups say the bill would weaken a system that has protected thousands of victims of defective products such as the Ford Pinto and A. H. Robins' Dalkon Shield birth-control device.

The debate has been energized by election-year politicking.

When accepting the Republican presidential nomination, President Bush pledged to climb "into the ring" against trial lawyers "to put an end to crazy lawsuits."

Probusiness publications such as Forbes Magazine and the Wall Street Journal have added to the partisan tone of the debate, citing the financial support of trial lawyers for Democratic presidential candidate Bill Clinton. Governor Clinton has not come out for or against the Senate bill.

Advocates of the bill say it is designed to win bipartisan support, unlike the more radical measures proposed by the White House's Competitiveness Council.

The Senate's Democratic leadership, which controls scheduling, opposes the reforms. Therefore, it is unclear whether the Senate will even get to vote on the bill. It cannot be debated unless 60 of the 100 senators vote to proceed. That vote, which both sides say will be close, is expected for Thursday, Sept. 10.

The bill would:

Be the first federal law. Currently product liability cases are tried under state law. All 50 governors last year signed a resolution calling for uniform federal standards.

Contain time limitations. Product victims would have two years to file a lawsuit once they are aware of the cause of harm. Also, lawsuits involving workplace equipment could be filed only if the machine is less than 25 years old.

Encourage out-of-court settlements. If one side rejects a settlement offer and then fails to win a better deal in court, that side could be asked to pay some of the other side's legal costs.

Proponents argue that this would help deter "frivolous" suits. Opponents say it would cause victims to settle for less than they deserve.

Encourage arbitration. A similar incentive discourages litigants from refusing an offer to try arbitration before going to court.

Limit retailer liability. Product sellers could be held liable only if they assembled, altered, or made false claims about a product.

Strengthen standards of proof. To award "punitive" damages (on top of "compensatory" damages), a jury must find "clear and convincing evidence" of fault.

This replaces "preponderance of evidence," the standard currently used in most states.

Weaken the "deep pocket" rule. Currently any defendant who bears part of the guilt can be held liable for all damages. The bill would maintain this provision for "economic" damages (such as medical bills), but awards for pain, suffering, and emotional distress would be limited to a defendant's proportional responsibility.

Limit liability in drug-related cases. If a claimant's use of alcohol or drugs is determined by a jury to be the primary cause (50 percent or more) of injury, a company could not be held liable.

Advocates and opponents are duking it out before Congress with "fly-ins" of corporate chieftains and product victims to argue their respective cases.

Pamela Gilbert, director of the lobbying arm of Public Citizen, a consumer advocacy group, attacks the bill for exempting makers of drugs approved the the US Food and Drug Administration and aircraft approved by the Federal Aviation Administration from punitive damages.

"Yes, we should be responsible for what we make, but there should be some reasonable limits," William English, chairman of equipment manufacturer Sturtevant Inc. of Boston, says in support of the whole bill.

In a 1988 survey of 500 chief executives of both large and small companies, 36 percent said they had discontinued product lines and 15 percent said they had laid off workers as a direct result of product-liability experiences. One-third of companies had halted introduction of new products because of liability concerns; 22 percent said they had halted merger or acquisition plans for the same reason.

The survey, conducted by the Conference Board, a business research group, also found that 15 percent of the firms were "going bare" - without product-liability insurance.

Another 15 percent created their own insurance firms. Two years ago Sturtevant Inc. joined with other equipment manufacturers in an insurance consortium. Mr. English said this move has dropped his company's annual premiums from $80,000 to $20,000.

Patrick McGuire, supervisor of the Conference Board survey, says the current bill will not do much to curb litigation.

The best way to improve the system, he says, would be to put time limits on various procedural steps to "hold both parties' feet to the fire," encouraging shorter trials.