Product Liability
Our analyses show that the issue is more complex than indicated by the policy debate about whether there is either "too much" or "too little" product liability.
In the early 1990s, the ICJ's study of the economic effects of product liability in the pharmaceutical and medical devices industries described how product liability could have detrimental effects such as discouraging innovation and compromising safety. It also suggested reforms that could limit such effects without endangering consumer safety. This work helped focus the national debate about product liability on systematic evidence, rather than on anecdotes and assertions.
The ICJ has continued its efforts to understand the tangible economic effects of product liability suits by studying effects on product sales, stock prices, and media coverage in the automobile industry. This research has revealed that, although product liability verdicts generate substantial press coverage, particularly when juries award punitive damages, verdicts do not typically dampen sales. Furthermore, verdicts against manufacturers appear to affect stock prices only when the case is one of several similar pending cases or when award amounts are very large.
These analyses establish that the issue is more complex than indicated by the policy debate about whether there is either "too much or "too little" product liability. Most important, it suggests that a guiding principle for reform should be to aim for a system that sends clear and reliable signals to companies about acceptable and unacceptable behavior.
Featured Publications
Punitive Damages and Deterrence of Efficiency-Promoting Analysis: A Problem Without a Solution?
Author: Steven Garber
Summary: Argues that socially worthwhile risk or benefit-cost balancing is strongly deterred because evidence of such behavior by corporations often leads to assessment of punitive damages.
Document information: RP-920. Originally published in Stanford Law Review, Vol. 52, No. 6, July 2000, pp. 1809-20.
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Establishing a Good-Faith Defense to Punitive-Damage Claims
Author: John W. Martin, Jr.
Summary: Argues that establishing a good-faith defense to punitive damage claims in product liability suits would help deter conduct that results in unsafe products by targeting the actions of senior management, rather than that of their employees.
Document information: P-8048, 2000, 12pp.
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Product and Stock Market Response to Automotive Product Liability Verdicts
Authors: Steven Garber and John Adams
Summary: Examines the effects of product liability trial verdicts on company stock prices and on new vehicle sales.
Document information: RP-794, 1999, 53 pp. Originally published in Brookings Papers on Economic Activity: Microeconomics, 1998.
Sponsors: Alfred P. Sloan Foundation, Institute for Civil Justice
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Newspaper Coverage of Automotive Product Liability Verdicts
Authors: Steven Garber, Anthony Bower
Summary: Examines newspaper coverage of product liability verdicts from 1983 to 1996 and its effects on the behavior of litigants, judges, juries, legislators and business decision-makers.
Document information: RP-809, 1999, 30 pp. Originally published in Law and Society Review, v. 33, no. 1.
Sponsors: Alfred P. Sloan Foundation, Institute for Civil Justice
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Product Liability, Punitive Damages, Business Decisions and Economic Outcomes
Author: Steven Garber
Summary: Argues that the current product liability system is haphazard as a deterrence mechanism, and that punitive damages magnify both good and bad deterrence effects.
Document information: RP-747, 1998. Originally published in Wisconsin Law Review, v. 1998, no. 1, 1998.
Sponsors: Alfred P. Sloan Foundation, Institute for Civil Justice
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The Real World of Tort Litigation
Author: Deborah R. Hensler
Document Information: Originally published in Everyday Practices and Trouble Cases, A. Sarat, et al., editors, Northwestern University Press, 1998.
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Estimating Liability Risks with the Media as Your Guide: A Content Analysis of Media Coverage of Tort Litigation
Authors: Daniel Seth Bailis and Robert J. MacCoun.
Summary: A content analysis of 249 articles from Time, Newsweek, Fortune, Forbes, and Business Week during 1980-1990 examined the representativeness of popular media coverage of tort litigation.
Document Information: Originally published in Law and Human Behavior, v. 20, no. 4, 1996.
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Understanding Mass Personal Injury Litigation: A Socio-Legal Analysis
Authors: Deborah R. Hensler and Mark A. Peterson
Summary: The civil justice system has not responded well to the challenge of handling mass torts, and many innovations have been proposed to improve processing of these cases. This article examines the broader context in which these innovations must function.
Document Information: 103 pp. Originally published in Brooklyn Law Review, v. 59, no. 3, Fall 1993.
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What We Know and Don't Know About Product Liability
Author: Deborah R. Hensler
Summary: An edited transcript of written testimony covering five topics: trends in product liability; the nature and extent of product-associated injuries and the rate of claiming associated with these; the role of the tort liability system in compensating injuries; the effects on manufacturer behavior; and the need for additional information about the product-liability phenomenon.
Document Information: 11 pp., ISBN: 0833021508, 1993.
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Product Liability and the Economics of Pharmaceuticals and Medical Devices
Author: Steven Garber
Summary: Examines the economic effects of product liability on firms producing drugs and medical devices, drawing on empirical information from a wide variety of sources, simulations, and interviews at three major pharmaceutical companies to examine the effects of liability on product availability, safety, effectiveness, and innovation.
Document Information: 227 pp., ISBN: 0833014501, 1993
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