"Tens of thousands of product liability cases are filed annually in state and federal courts, including some as class actions that involve hundreds of thousands or even millions of individuals as plaintiffs,” observe Mitchell Polinsky and Steven Shavell of the National Bureau of Economic Research in a forthcoming contribution to the Harvard Law Review. “The legal bases for product liability suits are expansive,” they emphasize, “comprising liability for manufacturing defect, design defect, and failure to warn.”
Polinsky and Shavell argue that “the case for product liability is problematic for a wide range of products,” because its benefits are “likely to be outweighed by the litigation and related costs.”
Product liability may be overkill for large firms responsive to market forces and subject to governmental regulation. “Even though product liability would lower product risk in the absence of market forces and regulation, it will turn out to be superfluous if a desirable safety precaution has already been taken because of these two factors,” say Polinsky and Shavell. In that case, product liability may be “socially undesirable, at least for widely sold products.”
The two analysts argue that “market forces and regulation are likely to be particularly important for products sold in high volume, considerably reducing the need for product liability to encourage safety. Moreover,” they add, “the available empirical evidence indicates that product liability has not in fact measurably enhanced product safety for such products.”
Polinsky and Shavell also cite “the price distortions caused by litigation costs and awards for nonmonetary losses” and note that the compensation to which victims may be entitled is “already achieved to a significant extent through private and public insurance.” In addition, “the product liability system generates high legal expenses, equaling or exceeding the payments received by plaintiffs.”
Polinsky and Shavell conclude that “serious consideration should be given to curtailing such liability” and recommend that courts “reduce the scope of product liability when such liability would be unlikely to significantly promote product safety or compensation.”
The two analysts also suggest legislation to “limit or eliminate product liability in certain industries or for certain widely sold products,” as has been done “for general aviation aircraft and for vaccines.” But why stop there? “Reducing or abolishing product liability might even make sense for the majority of widely sold products,” they affirm.
