Indiana Law Journal
products liability, risk utility, product defects, reasonable expectations
Law | Torts
The consumer expectations test in products liability law holds firms liable for producing goods that are more dangerous than the reasonable consumer would anticipate. But judicial experience in the majority of states that have utilized the consumer expectations test demonstrates that it is ambiguous and impossible to apply predictably. The test is ill-suited for regulating complex products or markets with heterogeneous consumers; moreover, the test requires courts to expend significant resources to identify consumers' ex ante beliefs about product risks, even when consumers lacked tangible beliefs about products at the time of purchase. The other major test that courts apply to design defects, the risk-utility test, is also not well defined. The several factors of the risk-utility test are difficult for courts to apply consistently and permit courts to overrule the preferences of consumers who may be willing to tolerate higher risks for lower prices.
In this Article, we propose that courts adopt an amended version of the consumer expectations test that we call the "specific consumer expectations test." The specific consumer expectations test would apply to any product or product component for which consumers have clear, articulable ex ante expectations about the function of the product. Under the specific consumer expectations test, a defendant is liable if consumers expected such a product to reduce a particular risk, and the product in fact increased that risk. Similarly, if a product was intended to convey a particular benefit, but in fact harmed consumers along the same dimension, the test is violated. For example, if defective airbags increased the risk of injury after a motor-vehicle crash rather than decreased the risk, that product would be deemed defective under the specific consumer expectations test. By shifting the law's focus from measuring the magnitude of consumer expectations to a simpler identification of the direction that consumers expected risks to change, the specific expectations test increases the administrability of products liability law and captures most of the incentives that the traditional consumer expectations test could theoretically provide. In particular, firms are incentivized to produce products that never increase risks unexpectedly, and consumers are empowered to purchase products which reflect their willingness to pay for risks. In cases where consumers lack specific expectations, we argue that courts should apply the risk-utility test to minimize unanticipated accident costs to consumers and firms.
We bolster our analysis with a novel experiment that demonstrates that the specific expectations test is consistent with the preferences of actual consumers. Our incentive-compatible experiment asked subjects to make consumption decisions over various risky products and determine punishments for the firms that manufacture defective products. The results reveal that individuals demand substantially greater punishments for firms that manufacture products that violate specific expectations. But, before the defect has manifested, consumers are willing to tolerate prospective defect risks in general as well as defects that would cause a product to perform the opposite of its intended function. It is after the defect has occurred that consumers display greater outrage with respect to product defects that impose harms that are the opposite of the intended function of the product or product component. Taken together, these results indicate that the specific expectations test would deter manufacturers from making defective products in the exact circumstances where consumers suffer the greatest harms from product defects, and the test would permit consumers to choose when to consume dangerous products without producers risking ex post liability.
W. Kip Viscusi and Clayton J. Masterman,
The Specific Consumer Expectations Test for Product Defects, 95 Indiana Law Journal. 183
Available at: https://scholarship.law.vanderbilt.edu/faculty-publications/1144