Product-Liability Bill A Near Miss in Senate
THE nation's manufacturers will have to "wait till next year" - or maybe longer - to win reforms designed to reduce the burden of product-liability lawsuits.Skip to next paragraph
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Last week supporters of a reform bill lost a key vote in the United States Senate by just two votes. With time running out before Congress closes shop for the year, the action effectively kills the legislation for this year.
The vote was not a rejection of the bill itself, but a failed attempt to prevent a filibuster. Fifty-eight senators voted to limit the debate. Sixty votes would have accomplished that, clearing the way for a vote on the bill.
"All we're trying to do is to let the majority ... speak," says William Fay, director of the Product Liability Coordinating Committee, the lobbying group set up by businesses to pursue the reforms. The Bush administration has made legal reforms a centerpiece of its economic agenda, arguing that frivolous lawsuits are a drag on the nation's businesses. What would Clinton do?
"We are in this for the long haul," says Mr. Fay, saying a majority in both houses of Congress supports the bill and expressing confidence that the legislation can pass in the next congressional session. But it is unclear what would happen if Democratic challenger Bill Clinton is elected president in November. In the past, Mr. Clinton has spoken out against similar measures, and many Democrats in Congress oppose the reforms, arguing they would weaken the ability of victims to sue corporations for damages . The Arkansas governor took no position on the Senate bill.
The bill would encourage litigants to try arbitration before going to court and would limit the "deep-pocket" rule, by which a company can be held liable for all damages, regardless of its share of guilt.
Just prior to last Thursday's vote, a consumer group released a study suggesting that the insurance premiums, lawyers' fees, and damage awards related to product-liability are far lower than the $100 billion figure cited by proponents of reform. The new study puts the figure at about $4 billion for 1991, says Pamela Gilbert, a lobbyist for Public Citizen, a consumer group that opposed the bill along with trial lawyers. The study, by the National Insurance Consumer Organization, used data from insurance c ompanies and attempted to account for the many self-insured companies.
"If that is the case, why is business up here doing this," asks Fay, calling the study "hogwash."
Ms. Gilbert says the study shows that the issue is "a minor blip on the radar screen of the economy."
For some industries, the issue is not minor. Impact on machine tool industry
Machine tool companies spend seven times as much on product-liability expenses as on research and development of new products, according to an industry study. Foreign competitors, meanwhile, have captured half of the United States market for these tools, which are basic to manufacturing.
"The machine tool industry has probably paid the most severe price," aside from the private-aircraft industry, says Howard Greis, founder and president of Kinefac Corporation of Worcester, Mass. The company makes metal-forming machines used by manufacturers of autos and other goods.
The high risk of lawsuits is "preventing capital investment" in the industry, says Mr. Greis.
Kinefac, which employs 80 people, has paid half a million dollars for product-liability insurance over the last decade; the company has faced only one legal challenge in its 30-year history, which Greis says was a minor case settled out of court.
Chouinard Equipment, once a leading maker of rock-climbing equipment, went bankrupt in 1989 as product-liability costs soared. "In no case did the equipment fail when properly used," according to a case study by the Product Liability Coordinating Committee. The company was targeted as a "deep-pocket" defendant in a case where a climber used equipment improperly.