Vital Signs

Who Pays the “Tort Tax”?

The United States, of all Western legal systems, is probably the harshest on manufacturers, at least insofar as they can be held liable for millions or even billions of dollars in damages for unanticipated defects in their products.  Until about the middle of the 20th century, liability standards in this country were not significantly different from those of England or Europe.  Manufacturers could not be held liable in litigation by those who suffered harm from using their products if the manufacturers exercised due care in the preparation of those products.  If, for example, reasonable practice in an industry was to pull every tenth widget off the line and inspect it for defects, the manufacturer would not be liable if, somehow, one of the unexamined widgets had defects that later caused harm.  This is called the negligence standard, and it still governs in other areas of tort law (the law of responsibility for damages caused to strangers).  Further, at least until the early 20th century, negligent manufacturers, with a few exceptions, had no liability to anyone but the immediate purchasers of their products.  For example, if an automobile manufacturer sold to a dealer, a consumer who had purchased a lemon could only recover from the dealer.

By the mid-1960’s, all of that had changed.  Under the new standard (pioneered in the courts of California, a source of much mischief in American torts...

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