Document Type
Article
Publication Title
The Journal of Legal Studies
Publication Date
1-1991
ISSN
0047-2530
Page Number
147
Keywords
products liability, liability insurance
Disciplines
Consumer Protection Law | Insurance Law | Law
Abstract
Examination of a variety of sources of statistics indicates that the product liability crisis is real, and it is not simply imagined or contrived by the insurance industry. Litigation in the product liability area has escalated dramatically, but to some extent the industry was able to mute the effect of this escalation because of the influence of rising interest rates in the early 1980s as well as because the shrinking market for product liability insurance masked much of the explosion that was occurring in terms of the costs of product liability coverage. The dominant pattern in the early 1980s was one of a disappearing insurance market. This phenomenon prompted many public accounts of a crisis in availability, which were often accompanied by case studies of, for example, day-care centers or municipal playgrounds that were denied liability coverage. Once interest rates began to decline in the mid-1980s, it became essential for insurance companies to raise the price of insurance to establish a better relationship between losses and premiums. The escalation in premiums that took place did not mark the advent of a liability crisis but simply a different manifestation of an ongoing crisis. In particular, there was a crisis in availability experienced in the first half of the 1980s, and a crisis in terms of escalating prices that emerged in 1985. Each of these phenomena was generated by the dramatic growth in the liability burden. This escalation in the cost of liability and the level of litigation more generally has not been restricted to the 1980s but has been the result of a longer-term shift in the role of product liability in American society. These shifts have had a profound effect on the product liability insurance market, which is but the most visible symptom of the widespread economic ramifications of the changing role of tort liability. Although the greatest surge in litigation has been for asbestos-related claims, other product liability litigation has risen as well. The market evidence in no way implies that earlier liability regimes were superior to the more costly liability regime now in place, but they do suggest that there has been a sufficiently fundamental shift in the effect of liability that a careful reexamination of its functions is warranted. The timing of the expansion in insurance premiums also indicates the major sources of the higher litigation rates. Although premiums rose in the 1960s, the greatest expansion occurred in the 1970s and to a somewhat lesser extent in the 1980s. This pattern suggests that it is the role of product defect doctrine and hazard warnings cases rather than the adoption of strict liability that has led to the urgency with respect to the need for product liability reform.
Recommended Citation
W. Kip Viscusi,
The Dimensions of the Product Liability Crisis, 20 The Journal of Legal Studies. 147
(1991)
Available at: https://scholarship.law.vanderbilt.edu/faculty-publications/127