Product-Related Accidents

Abstract

Abstract During the mid-1980s most U.S. jurisdictions faced a crisis in the availability and affordability of liability insurance: premiums skyrocketed, sometimes by several hundred percent in one year; in some cases, coverage itself became unavailable. Total premiums for general liability insurance, which includes product liability, tripled in only 2 years in the mid-1980s, from $6.5 billion in 1984 to over $19.4 billion in 1986.2 Over the decade 1968-78, general liability insurance premiums written increased from $] .13 billion to $6.49 billion (a real annual growth rate of 8.8%). From 1979 to 1988, premiums increased from $6.61 billion to $19.08 billion (a real annual growth rate of more than 4%)..Between 1975 and 1989 the number of product liability claims filed annually in federal district courts increased from 2,393 to 13,408 (a 460% increase) and from 2.04 to 5.76 as a percentage of all federal civil cases over this period.. Average product liability jury awards increased from $195,020 in 1971 to $1,535,944 in 1988, and median awards increased from $71,500 to $405,000 over this period, an annual increase in real terms of between 4% and 6%..However, some scholars have argued that the perception of a crisis in product liability is unfounded. Corley and Hanson contend that empirical evidence does not support a negative interpretation of the above cited trends and that the expansion of product liability in fact furthers the deterrence and insurance goals of tort. While not disputing the statistics themselves, Corley and Hanson argue that the rise in insurance premiums represents an internalization of costs that had been externalized prior to liability expansion; thus, the rising costs of insurance and withdrawal of products from the market evidence a shift to a more efficient level of deterrence..