How We Got into this Mess
The accumulation of product liability is a risk to both the insurance business and the public. Blame for this crisis has been mostly on the insurance companies in increasing the rate of premiums and the legal professions in their use of the tort law to acquire high settlements. Tort law and the system of liability have evolved such that it is proving difficult to find a solution for this crisis. As tort law, system grows, so does insurance coverage and premiums. In result, this has caused the accumulation of product liability. The original objective of the tort system was to provide healing for an injured person due to the actions of another person and to punish the person who caused the injury. Liability insurance, however affected this, through the introduction of premiums, whereby the society, rather than the person in fault, would provide for this compensation.
There were two crisis of the insurance system, which complicated the issue of liability. One of the crisis that would have had a major effect occurred in 1970. It was proposed that the tort law be eliminated under the circumstances of spontaneous accidents. In this case, the affected parties would be compensated under the system of the first party. Compensation would include medical cover and damage cover in an economic loss. The individuals would be compensated with no consideration on which party was at fault. Carriers that gave auto insurance for large organizations were the main supporters of this proposal, while the opponents were organizations that worked with individuals in businesses. This debate ended in a conclusion that would cause more cost on the public, than the previous system, which was dependant on aspect of fault, had. The second crisis was caused by the high rate at which suits of medical-malpractice were growing. This negatively affected the medical service in that there was no action taken against doctors who were incompetent. Doctors covered for each other even in such cases.
However the judicial system and the bar of plaintiff, corrected this by exposing doctors who were not doing their work well. When the plaintiffs’ bar discovered that insurance companies were economically capable of giving higher insurances, they encouraged the public to demand more. It is from these medical and auto experiences that product liability evolved. Product liability provided a platform for the establishment of important tort laws, such as cumulative injury and punitive damages. However, product liability has its disadvantage, in that the number of people, who incur injury, has the ability of accumulating in a long duration of time. Another effect is that companies pay too highly for damages, as compared to the economic loss incurred. In result, a company could become bankrupt. Product liability is increasing growing at a high rate such that at some point it will be impossible for insurance companies to cover it.
Solutions for this mess may be through steps taken by the congress, in developing a law that will cover the size of damages awarded. In this, the tort law would be carried out in two systems. In the first system, a person acquires compensation for loss or injury incurred, with no consideration for the cause of the loss or injury. The second system will serve the purpose of punishing professions who do not follow particular set standards. Punishment will be determined either by the criminal law or by the particular profession. In the case of manufactured products, the adherence of both standards and tests would be required.
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