Administration proposes new limits on product liability awards

Experts disagree on the extent to which the United States insurance industry is in a state of ``crisis.'' But the Reagan administration believes that there is an insurance crisis, and that it has been brought about in large part by an ``explosion'' of huge liability judgments awarded by juries to injured plaintiffs.

On Wednesday the administration unveiled a proposed new product-liability legislative package that it hopes will encourage insurance companies to resume selling affordable policies to ``risky'' clients.

Attorney General Edwin Meese III and Commerce Secretary Malcolm Baldrige also stated at a press conference that the proposed measures would help boost US productivity and competitiveness by eliminating excessive jury verdicts and reducing high insurance rates, which, they said, raise the costs to consumers of affected products and services.

``The public now recognizes that excessive jury verdicts and escalating insurance rates must be paid by someone, and that someone is the individual citizen,'' Mr. Meese said.

In brief, the administration's proposal:

Establishes a national standard for all American product liability cases, under which liability would be based on a manufacturer's negligence or fault in making a dangerous product.

Limits jury awards for noneconomic damages, including ``pain and suffering,'' and punitive damages to not more than $100,000.

Restricts lawyers' fees to 25 percent of the first $100,000 of an actual award, and to 20 to 10 percent of amounts above $100,000.

Permits judges to reduce jury awards by amounts already paid to injured parties from private or public insurance or health-care plans.

Consumer and public-interest lobbying groups, however, are denouncing the administration's proposal, saying it will make it much more difficult for ordinary Americans who were injured by faulty products or negligent corporations to sue them for damages.

``In many ways the most injured victims will suffer the most,'' says Arthur Bryant, a staff attorney with Trial Lawyers for Public Justice. ``In very many instances, the truly guilty, blameworthy party will escape without having to pay an appropriate amount in damages,'' he says.

Product liability laws permit consumers who were injured as the result of a faulty product or the negligence of the manufacturer to take the manufacturer to court. Under current laws the manufacturer (and its insurance company) can be ordered by the court to pay all medical and other out-of-pocket expenses incurred as a result of the accident. In addition, a jury may award an unlimited amount of money to the injured consumer in punitive damages to punish the manufacturer or as compensation for the consumer's ``pain and suffering.''

Manufacturers complain that they are being besieged by unreasonable lawsuits by consumers who are injured out of their own carelessness, but who hire clever lawyers.

Sharon Spigelmyer of the National Association of Manufacturers says the lure of multimillion-dollar awards is encouraging an increasing number of consumers to take their gripes into court.

``What we are going to have is a society where you can't buy football helmets, . . . where you can't buy cotton clothing for fear that it might catch on fire. We have got to come to some balance between the utility of products and the harm they may create,'' Ms. Spigelmyer says.

Consumer groups see it differently. They maintain that with an estimated 30 million product-related accidents each year, only a small fraction of injured consumers are taking legal action.

``The real goal here is to put some kind of limit on the legal wheel of fortune that our system now creates,'' says Assistant Attorney General Richard Willard, who chaired a Justice Department working group that developed the administration's liability proposal. ``There is no reason why a lawyer who wins a [liability] case should become an instant millionaire,'' he says.