Unwise Product Liability Reform

Today the Senate could take up a bill that makes a new attempt to “reform” the tort liability system by instituting national limits on civil damages and exposure to liability, an area that historically has been the province of state courts. But the measure before Congress would actually do little to address what many see as inconsistent damage awards and much to hamstring consumers harmed by dangerous or defective products.

The bill, sponsored by Sens. Slade Gorton (R-Wash.) and John D. “Jay” Rockefeller IV (D-W.Va.), would cap punitive damages against smaller companies and limit the liability exposure of those who market defective goods. It would also bar some product-defect suits altogether.

Imposing strict limits on civil damage recoveries and “frivolous” lawsuits was a key part of the Republican “Contract With America.” But the bill that Congress passed in 1995 would have so severely penalized consumers that President Clinton wisely vetoed it.

The current version is less severe--but not much smarter. For example, by shielding smaller companies, based on the number of employees or their annual sales figures, the sponsors have alienated many larger corporations, including a group of Fortune 100 companies that now formally opposes the measure.

More to the point, there has been no explosion of product liability filings or tort awards to justify this bill. Instead, a recent study found that businesses file more than 20 times as many lawsuits against other businesses as are filed by injured consumers in product liability and medical malpractice cases combined.

There are some good things in the legislation--for example, the liability limits would not apply to cigarette makers, and even small companies that make handguns would remain vulnerable to defective-product suits. On balance, however, this bill is unnecessary and unhelpful.