The Facts About Product Liability Lawsuits

For years, the proponents of products liability legislation have waged a disinformation campaign about the alleged frequency of products liability lawsuits and economic advantages of restricting people's ability to bring such suits. Boiled down, their arguments suggest that the way to make American industry more competitive is to make it more difficult for the sick and injured to sue and collect fair compensation for their corporate-caused injuries. There is no basis for this view.

There is no "explosion" in the number of products liability lawsuits.

  • According to the National Center for State Courts, products liability suits comprise only about 40,000 out of approximately 19.7 million civil cases filed annually in state trial courts (.002%). By comparison, the state courts handle 60 million new traffic and other ordinance violations each year.
  • Business to business cases are responsible for far more litigation than product liability cases: 11% of new civil case filings in general jurisdiction state courts are contract cases alone, typically between businesses. This is more than 10 times as many lawsuits as are filed by injured consumers in products liability and medical malpractice actions, combined.
  • According to the Rand Institute for Civil Justice, funded in part by insurance companies, only 10% of the people injured by dangerous and defective products actually sue for compensation.

Products liability awards are consistent and conservative, not out of control.

  • According to a 1996 study by Jury Verdict Research, a legal research firm, the median compensatory damage award in products liability cases in 1995 dropped to $260,000 from the 1994 median figure of $379,685. An extensive U.S. General Accounting Office study of products liability verdicts concluded that the size of damage awards generally correlated to the severity of the injury suffered and the amount of actual economic loss. (See, Current Award Trends in Personal Injury, 1996 Edition, Jury Verdict Research, LRP Publications; Products Liability: Verdicts and Case Resolution in Five States, GAO/HRD-89-99 (1989)).
  • According to research conducted by Professor Michael Rustad of the Suffolk University School of Law, in the 25-year period between 1965 and 1990, there were a total of only 355 punitive damages awards in state and federal products liability lawsuits nationwide. An updating of this study found that there were only 379 punitive damage awards in state and federal products liability lawsuits between 1965 and 1994 -- an average of 13 per year. (See, Michael Rustad, In Defense of Punitive Damages in Products Liability: Testing Tort Anecdotes with Empirical Data, 78 Iowa Law Review 1 (1992); Jonathan S. Massey, Analysis of Total Number of Punitive Damage Awards 1965-1994, prepared at the request of Sen. Ernest F. Hollings, April 13, 1995, Cong. Rec. S5951 (May 2, 1995)).

Products liability suits have a negligible impact on the economy.

  • A recently released 1996 industry survey conducted by the Risk & Insurance Management Society found that all liability insurance costs for America's companies have dropped to only $5.70 per $1,000 of revenue. This represents a 12% decline from 1995 figures and the fourth consecutive year of decreasing liability costs. These annual surveys also show that companies of all sizes, including smaller employers, are spending less on liability insurance.
  • According to data collected by the National Association of Insurance Commissioners (NAIC), products liability insurance costs 26 cents per $100 of a retail product. Between 1987 and 1993 products liability insurance premiums dropped from $4 billion to $2.6 billion.
  • According to NAIC data, total products liability verdicts and settlements for insured and uninsured manufacturers cost $4.1 billion in 1993, in a total economy of about $7 trillion. This is a bargain since 90% of wrongfully injured people do not even file a lawsuit. By comparison, just General Motors' after-tax profits in 1995 were $6.5 billion.
  • Manufacturers also suggest that to avoid capricious treatment under current laws they must vary product design or construction on the basis of varying state laws. There is no evidence to substantiate such charges. Products liability cases are adjudicated based on long-held standards of reasonable care under the common law. This is not the same as states imposing varying engineering standards for nationally distributed products like automobiles or heart valves.