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Product Liability

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Today’s “lawsuit trigger happy” American society has transformed product liability issues into a massive headache for most manufacturers. In fact, companies and decision-makers these days are concerned more about lawsuits arising from product liability claims than about producing the best product for the consumer. There are companies out there with limited growth prospects, struggling to survive because they spent more money on lawyers than on R&D initiatives. It has gotten to the extent where entry into a specific market is judged by the degree of losses that can be inflicted on the manufacturer via such liability suits.

Liability suits resulting in huge damage awards are commonplace in every industry, from cigarette manufacturers to automotive manufacturers to HMO’s. And, although the US senate has attempted (and been successful in some cases) on several occasions to pass laws that would limit damage awards, these laws have been vetoed by the President. It would appear as though the federal, and in some cases the state level courts have become so consumer sympathetic that there is not much that manufacturers cannot be held responsible for these days.

Our legal system seems to be promoting the concept of transforming lawyers into de facto lawmakers, trying to shape corporate behavior by forcing companies to change how they design/manufacture/promote their products, and according to some advocacy groups helping to do what Congress cannot: “regulate irresponsible behavior. “2 Amidst the legislation deficiencies and excessive politics, the product liability issue has become a full-fledged crisis and recent lawsuit developments such as the recent $145 billion Florida tobacco ruling are doing nothing but adding fuel to the fire.

The following paper, via the analysis of specific product liability lawsuits, analyzes the ethical and public policy issues that relate to product liability. The High Risk Safety Product Case It is rather ironic that a law, which was created to protect the public interest, sometimes, does not serve the public’s best interests; the existing law acts as barrier, as in the MDC case, preventing a better product from entering the market. In this case, the company is reluctant to buy the fiberglass-reinforced plastic (FRP) technology because of the existing building codes.

FRP wallboard is better than the existing wallboard because it is almost fumeless when it catches on fire, therefore, it is a safer material to use in buildings such as schools, hospitals, and nursing homes. However, the building codes are only concerned about the flame and smoke aspects of the building materials when it catches on fire. If MDC buys the FRP technology, the company will be producing product that is safer but beyond the building code requirements which may cause the product to be not very marketable. Another problem that MDC faces is its current production of the old style wallboard.

It would be unethical for MDC to keep producing the old style wallboard, knowing that it is not safe. However, the company will be at great risk (financially risky) if it stops making the old style wallboard and only produces the FRP wallboard. 4,5 According to the utilitarian aspect, we would argue that it would be ethical for MDC to stop making the old style wallboard because they know that the product is unsafe. Although the company would lose money in the short run, according to the calculations, the company will still be profitable in the long run.

In addition, by using the FRP product the company will be doing the most good for all its customers. This argument is also supported by the Kantian perspective. According to reversibility, if MDC were the consumers, they probably would have wanted the manufacturer to stop producing unsafe products. Therefore, it would be ethical for MDC for only produce the FRP wallboard. The ethical issue becomes more difficult when we look at it from our “real world” ethical standpoint. It is difficult deciding who should absorb the risk and the cost.

Even though it may be ethical for MDC to stop making the old style wallboard, the company may be at a huge disadvantage because other companies are still producing it. If the building codes do not get changed, MDC will be at great financial risk because not many customers (contractors) will buy FRP wallboard since they can “get by” the building codes by using the old style wallboard. Our recommendations regarding FRP are the following. First, MDC should test the product and make sure that it is safe. Then they should educate the public and let them know about the product.

They could also attempt to build a partnership with some lobbying group for public safety and attempt to pass legislation based on the proof that FRP wallboard should be mandated in the building codes for safety reasons. In the mean time, MDC should introduce the product to the market by targeting only the regions where commercial construction is strong. This way the company gives the benefit of the doubt to the public which in turn gives the company a chance to market the product. As a result, the company would absorb less risk than to stop making the entire line of other product and only produce the FRP panels.

Consequently, if the demand for FRP panel from the public is low, then the company should stop producing it and resort to “business as usual” with the existing panels. This way, at least, MDC is doing its best for the public interest and also performing its ethical duty to the public. Public Policy The MDC case is a good example of the deficiency in the law. The problem with the existing law, building codes for example, is it only uses the results from the lab test to set a standard for the code. Therefore, the hazardous factors take into account in the lab test are limited.

Another problem with the building codes is that they adapt to the change in technology at a very slow pace. MDC will have to spend a lot of money campaigning and risk its competitive edge in the marketplace, before the government changes the building codes. In the mean time, many lives will be lost because the new building codes will not be implemented early enough to prevent some tragedy from happening. As a result, we would argue that it is very crucial for the legislative branch of the government to have the ability to revise the law at a faster pace when new information or technology is available. 5

Alexis Geier v. American Honda Motor Company, Inc. I n1992 a District of Columbia woman, Alexis Geier, who suffered serious head injuries after crashing her 1987 Honda Accord, filed a lawsuit against the American Honda Motor Company. 1 The basis of her suit was that the car was “defective” because it did not have a driver’s side airbag, which the car was not required to, according to federal regulations in the year (1987) the car was manufactured. Although American Honda was shielded from liability under federal law, the woman’s attorney argued that encouraging such lawsuits was the intention of congress to “drive manufacturers to the right decision.

The fact of the matter was that some states such as Pennsylvania and Mississippi had banned such lawsuits while others such as New York, Arizona, and New Hampshire had allowed them. After several years of litigation proceedings, on May 23, 2000, the Supreme Court, in a 5-4 vote, ruled that “Americans that drive/ride in cars built prior to federal regulations requiring airbags, cannot, if hurt in accidents, sue automakers for not installing airbags. ” 7 We can analyze this case from all the different academic ethical approaches and arrive at the same decision that the Supreme Court did.

It is important to note that in 1987, most auto manufacturers were in the midst of completing extensive research and development on airbags as a supplemental restraint system. The Aristotle point of view, which dictates virtue ethics, states that one must always do the right thing irrespective of the consequences. In the case of Honda, no wrong was done to the public by not installing airbags in cars 1987, before the airbag R&D was thoroughly completed. The car was well within the federal regulations by providing the occupants with a seat belt and shoulder harness.

The decision to not install airbags was probably a wise one at that time, given the number of potential injuries that could have resulted from installing an experimental airbag restraint system. The Kantian perspective on ethical issues practices universality and reversibility. It preaches practical rationality based decisions. According to this point of view, if the consumer and the manufacturer roles were reversed, rational decision-making suggests that the car still would have been equipped with the seat belt restraint system, nothing more and nothing less.

And finally, the utilitarian aspect suggests the most good (happiness) for the most number of people. This approach suggests that equipping the Honda with the airbags, which were in the experimental stages, would have inflicted more harm on more people, and would have brought about a much greater degree of pain and suffering. Thus the car had been equipped with the seat belt restraint system, which, according to the laws and the manufacturer, at that time, was designed for the safety of all buyers, thus bringing about the most good.

So what, one may question, was the logic of this person holding Honda responsible for her injuries. The above product liability lawsuit again brings to attention an idea of liability even more extreme than strict products liability. Even according to Strict Products Liability, which is very much a utilitarian doctrine, the seller of a product must compensate the user for injuries suffered because of a defective aspect of the product.

But even under strict products liability, the key to holding the manufacturer liable is to prove that the product was defective when it left the manufacturer. As a result, any rational human being would argue that since the Honda Accord, when it left the manufacturer, complied absolutely with all federal regulations, and did not even at the time of the accident possess malfunctioning seat belts, was in no way a defective product. Thus examining the issue from any ethical perspective would suggest that Honda as the manufacturer was is no way, legally or ethically, connected or responsible for the injuries that Alexis Geier suffered.

The only plausible rationale for the lawsuit described above would be that the woman had one and only one motive: personal benefit by extracting financial compensation from corporate America for her own lack of driving abilities. Any decision remotely in agreement with her plea would suggest that Honda, who had followed all federal regulations, in addition to being responsible for recalling all cars manufactured prior to 1989 to refit them with airbags, would also be held liable for damages in any automotive injury cases involving Hondas manufactured prior to 1989.

Such an ruling would undoubtedly be unfair, unimaginable, absurd, ludicrous, and to say the least, impractical. Basically, the only view that would conform to the woman’s lawsuit against Honda would be Hobbes’ view that man pursues paths that satisfy only his own good and that his motives are purely based in self-interest. Conclusion The mad rush of consumers trying to hold companies responsible for any ill-effects of a product today, and the consequences that follow, makes it clear that neither companies nor consumers are remotely interested in the ethical or public policy aspects that emerge from product liability claims.

It is however, disheartening to note that major discrepancies which exist between the laws at the federal and state levels and also between what the law dictates and what public policy dictates, have encouraged many of these frivolous product liability cases. During the course of these numerous, big damage lawsuit proceedings, we as a society have lost view of the fact that lawsuits were originally designed to protect the consumer, not to assist consumers to take advantage of manufacturers who are not at fault.

For example, spilling hot coffee on oneself should not, under any stretch of the imagination, justify one to extract millions of dollars from the distributor of the beverage. The simple fact of the matter is that if a product is not defective (broken or knowingly deficient as to inflict harm on a consumer), there is absolutely no moral connection between anything the manufacturer has done (or not done) and the consumers’ injuries. 3 As a result, according to all three views discussed in our academic discussions of ethics, Aristotle, Kant, and Utilitarian, the manufacturer cannot be held responsible for any sort of damages.

And that should be the basis of public policy. A simple combination of ethical conduct and common sense would suggest that laws regarding product liability at both the state and federal level should be universalized (or made uniform). This would lead to a “fair” legal system closely matching what public policy dictates, and also sending the correct message to only those manufacturers that are negligent or indifferent in issues pertaining to product liability.

Unless and until the legislative body is successful in passing product liability laws that conform or cater, in a fair manner, to both the consumer and the manufacturer, and in some way resemble the basic ethical principles presented by the Kantian perspective, we will continue seeing an increase in huge damage award product liability cases, which benefit and serve the purposes of a very few looking out for self interest only.

And just when we thought lawsuits related to product liability could not get more blown out of proportion, analysts in the field believe that the next wave of liability suits will include automakers being sued for manufacturing cars that far exceed the speed limit, thus contributing to accidents and fatalities. 2

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