Study Urges Federal Law on Product Liability
A federal product liability standard and major changes in state insurance laws are needed to quash a growing threat to the economy and vital services, according to a report to the National Governors’ Assn.
The governors’ association task force offered general recommendations for states to follow as they address problems with soaring liability premiums.
The chairman of the panel, Rhode Island Gov. Edward D. DiPrete, said the report will be presented to the association’s annual meeting later this week in Hilton Head, S.C.
“The effect of the liability insurance crisis on our economy and on our society cannot be ignored and must be addressed in a prudent, balanced and coordinated manner,” DiPrete said last week at a news conference.
“As costs escalate and insurance availability is called into question, businesses and individuals are less inclined to take risks,” DiPrete said. “The result: Progress is impeded, as innovation and entrepreneurialism are stifled.”
The task force urged the governors’ association to drop its longstanding opposition to a federal product liability law. Varying state laws greatly hinder interstate commerce, DiPrete said.
“National uniformity will serve the interests of the public and our job-producing business community,” DiPrete said. “The patchwork of state product liability statutes has caused confusion and consternation for many businesses, whose activities and impact transcend state boundaries.”
The Reagan Administration has proposed a uniform product liability law, and DiPrete, a Republican and former insurance executive, said he hoped the Democrat-dominated governors’ association would not subject the recommendation to a partisan debate.
Although the association traditionally has rejected calls for a federal product liability standard, the Western Governors’ Assn., the Southern Governors’ Assn. and the Council of Great Lakes Governors this year have backed the proposal.
The task force urged the states to revamp tort laws, put reasonable caps on non-economic damages and establish market assistance plans to help businesses and municipalities deal with costly liability premiums.
The report suggested that states study whether to cap punitive damage awards and said non-economic awards for pain and suffering should be limited to make jury awards more predictable for insurance companies in assessing risk levels. New Hampshire has outlawed punitive damages.
It suggested following the lead of 25 states that have established intergovernmental pools to insure municipalities, and the formation of joint underwriting associations to bring together several insurers to provide medical malpractice insurance.
State insurance regulators should provide referrals to day care providers, whose liability premiums have skyrocketed by as much as 400% in recent years, and other social agencies grappling with insurance problems, the report said.
Laws providing for structured payments of large settlements and a statute of limitations for filing liability suits also would help stem insurance costs, the task force said.
In addition to DiPrete, other panel members were the governors of Massachusetts, New Hampshire, New York, New Jersey, Ohio, Illinois, Virginia, Missouri and Nevada.
