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117

PRODUCT LIABILITY REFORM ACT-S. 2760

TUESDAY, SEPTEMBER 9, 1986

U.S. SENATE,
COMMITTEE ON THE JUDICIARY,

Washington, DC. The committee met, pursuant to notice, at 10:05 a.m., in room SD-226, Dirksen Senate Office Building, Hon. Orrin G. Hatch presiding.

Present: Senators Grassley, Specter, McConnell, Broyhill, Biden, Metzenbaum, Heflin, and Simon.

Staff present: Laurence R. Herman, chief counsel, Subcommittee on Courts; Christopher Dunn, minority counsel, Subcommittee on Juvenile Justice.

OPENING STATEMENT OF SENATOR ORRIN G. HATCH Senator HATCH (presiding). If we could begin. The purpose of this hearing is to thoroughly examine the Product Liability Reform Act, S. 2760, which was favorably reported by the Senate Committee on Commerce, Science, and Transportation, and will soon be debated in the full Senate.

Proponents of the bill point to the costly, slow, inequitable, and unpredictable nature of the current product liability system. Extensive hearings have been held in the Commerce Committee on the problems facing business and consumers relating to product liability, and in the Judiciary Committee, on the issue of tort liability, generally.

Prior hearings have focused on the many consumers who are injured by defective products, and who are unable to recover damages or must wait years, by necessity, for recovery.

Not only does the present product liability system generate excessive transaction costs, but it also fails to fairly compensate injured victims in proportion to their actual economic losses.

Moreover, the inefficiency, and unpredictability of the product liability system is cited as a cause of the insurance availability and affordability crisis facing many companies today, whether they produce vaccines, medical devices, textile manufacturing equipment, sporting goods, machine tools, et cetera.

Therefore, with the benefit of testimony from prior hearings, and an awareness that the present product liability system adversely impacts both plaintiffs and defendants, as well as manufacturers, product sellers, and consumers, we turn to a careful examination of S. 2760. How will this bill affect the current product liability crisis? Is it adequate in its scope? Is its approach beneficial? Is a Federal solution necessary?

With these questions in mind, I look forward to the testimony of the distinguished witnesses who are here today and tomorrow.

Many people have felt that our current products liability system is outdated, outmoded, inefficient; that it does not work, and that both sides are very unhappy.

Frankly, there are many inequities that literally make it almost impossible to have fairness and justice result from this current system.

So the purpose of this hearing today is to look into these matters and see what can be done, and of course with particular interest on this bill.

So we will begin this morning with the distinguished Assistant Attorney General of the United States, Mr. Richard Willard. We welcome you to the committee, Mr. Willard, and look forward to taking your testimony at this time. Let me put in Senator Grassley's statement right now. [Senator Grassley's statement and the text of S. 2760 follow:]

PREPARED STATEMENT OF SENATOR CHARLES E. GRASSLEY Thank you Mr. Chairman. First let me commend the Chair for his determined effort to get this issue before the Committee. I welcome this opportunity to consider S. 2760, the Product Liability Reform Act, as reported by the Commerce Committee.

Although we don't have an official referral of the bill, we have an obligation to give the full Senate our views, before the Senate takes up this bill on the floor.

Few issues have so quickly become a national concern as that of liability insurance and product liability. This fact was demonstrated in the recent recommendations in the 1986 White House Conference on Small Business. At that conference, our Nation's entrepreneurs called civil justice and product liability reform their top priority. Specifically, the conference called for enactment of S. 2760, with amendments establishing fault-based defenses, and amendments to eliminate joint and several liability.

Since small business generates 70 percent of the new jobs in this country, I believe we have a duty to carefully consider the call of the 1,800 delegates at the White House Conference on Small Business.

I recognize this is a tough issue, and we are challenged to sort through the charges and counter-charges of who's to blame. Some facts are unassailable.

Nationally, the number of million-dollar jury awards in personal injury cases jumped from 27 in 1975 to 401 two years ago. And average jury awards have been increasing about 15 percent annually since 1975.

In Federal courts the number of product liability suits filed during the past 10 years rose 785 percent. In Iowa, the tide of civil cases rose nearly 50 percent between 1974 and 1985, though our State's population hardly grew at all.

The Des Moines Register recently reported that liability insurance premiums for Iowa companies have increased as much as 1,500 percent in the past year. Many businesses are charging more for their products; others are scrapping products and laying off workers.

The insurance policies of one-third of Iowa's nursery schools and day-care centers were either cancelled or not renewed last year. Insurance has all but dried up for Midwest farm fertilizer dealers. And Iowa's casualty insurance companies are doing no better-they lost $250 million in 1985. Two large firms were taken over and liquidated by the State, and a third one is in trouble.

More than 50 family doctors in Iowa have stopped delivering babies; 19 have stopped performing surgery due to high insurance costs. Others simply pass the cost on to their patients.

This issue has even invaded the innocent world of child's play. The Miracle Recreation Equipment Co. of Grinnell, Iowa, in the country's largest playground equipment manufacturer. It also is a defendant in some 70 lawsuits.

Mr. Chairman, no State is unaffected by this issue. I don't know that we can successfully untangle this spider's web of liability, but surely we must try.

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