The recent decision by A. H. Robins Co. to reorganize under federal bankruptcy laws -- which has frozen hundreds of injury claims by users of the company's Dalkon Shield birth-control device -- has given new impetus to changing the way corporations compensate victims for damages allegedly caused by their products.
Sens. John Danforth (R-Mo.), Slade Gorton (R-Wash.) and Christopher Dodd (D-Conn.) are trying to create a system outside the courtroom that would guarantee swift compensation to victims of hazardous products who want to avoid expensive and lengthy litigation.
More than 5,000 women who sued Robins remain uncompensated for their alleged suffering from pelvic infections, sterility and involuntary abortions from use of the Dalkon Shield device. Another 16,500 people who allegedly have asbestos-related health problems have waited for three years to plead their cases against Manville Corp., the building products manufacturer that also sought refuge under the bankruptcy laws.
The debate for reform of product liability laws -- which allow individuals to sue corporations for damages they claim are caused by a company's product -- has spanned a decade, usually pitting consumer activists and labor groups against manufacturers and the insurance industry.
Corporations argue that their coffers are being drained by the abuse of current product liability laws, while consumer groups claim that thousands of alleged victims of dangerous products deserve swifter compensation.
"We need to expand the ability of victims to recover for injuries caused by a product," said Gene Kimmelman, legislative director of the Consumer Federation of America. "Because many people lack insurance or other means of paying for product-related injuries, a strong product liability system is essential to protect the American consumer."
The product liability debate is gaining increased public attention in light of revelations about Robins, Manville and other companies, including Eli Lilly Co., which last week pleaded guilty to criminal charges linked to the deaths and injuries among users of its arthritis drug, Oraflex.
The battle on Capitol Hill is shifting, however, away from previous attempts by the business community to replace the inconsistent laws of individual states with a single federal standard and more toward a no-fault victims' compensation scheme.
Although numerous victims' compensation plans have been proposed, the general idea is to encourage victims and companies to avoid the costly courtroom process. A victim could first submit a claim to the company, and if the company failed to respond with acceptable compensation, then the case would go to an independent arbitrater. The victim and the company could still reject the arbitrater's decision by going the traditional lawsuit route.
These plans are commonly called "no-fault compensation" because even if the company pays the initial claim, it is not admitting negligence -- that a company knew or should have known that a product was defective.
Supporters of such a scheme argue that it would provide an incentive to companies to settle and would offer an alternative to consumers who want to avoid lengthy and costly litigation.
"A consumer may wait as long as five or more years before receiving the first dime from the defendant," said Linda Lipson, legislative counsel for Consumers Union, which supports the concept of a no-fault victims' compensation scheme. "During the painfully slow process of litigation, the injured person has to live, may be unable to work if seriously injured, and may have hospital bills and other expenses to meet.
"Where the process is delayed, victims are under extreme economic pressure to settle the claim on any terms available," Lipson added. "Delay clearly helps the defense. The more time accumulates, the more likely it is that memories will fade and evidence will be lost."
The business community also wants to halt the product liability morass, but for different reasons.
"The current system is costly, impedes product safety and benefits only the lawyers, who earn large fees for litigating the confusing and uncertain legal issues," said Victor E. Schwartz, counsel for a business coalition called the Product Liability Alliance.
"The current system also is a cause of rising costs of product liability insurance. Not only have insurance rates been rising, but some insurance companies have been restricting the availability of coverage," Schwartz added. "Some manufacturers, such as manufacturers in the sporting goods industry, find it difficult to obtain insurance at any price."
Howard Bruns, president of the Sporting Goods Manufacturers Association, said many of the group's members complain that they cannot get their liability insurance renewed, and their premiums have increased tenfold in the last year.
Manufacturers have fought for years to create a law that would make it more difficult for individuals to win product liability suits. Companies argue that current laws don't protect them because they vary from state to state, create uncertainty and unpredictability for businesses, and make it easier for injured victims to collect multimillion-dollar verdicts because they are not required to prove negligence.
"We should hold a drug manufacturer fully responsible for illness or injury caused by the manufacturer's negligence," said Gerald J. Mossinghoff, president of the Pharmaceutical Manufacturers Association. "But today, millions of dollars and enormous amounts of scientific energy -- resources that should be spent finding new cures -- are being wasted defending useful and properly made products."
"There is urgent need for uniform, stable product liability law which will provide the predictability needed for rational product management and for rational insurance rate-setting," said Martin F. Connor, Washington counsel for General Electric Co.
But it is just that predictability and certainty that consumer advocates like Ralph Nader have been fighting against.
"It is the uncertainty of a cost impact on a company that creates deterrents against criminal acts by manufacturers," said Nader. "Businesses want discernible, fixed costs so they can do business as usual."
The Danforth proposal, which some say is an attempt to bring together consumer, business and labor interests, would create a federal product liability law along with a victims' compensation scheme. Danforth's no-fault compensation scheme would be limited to actual costs, such as medical expenses and lost wages, and would not include compensation for pain and suffering or punitive damages.
Consumer groups remain skeptical about whether the congressional proposals would maintain an adequate incentive for companies to produce safe products and whether adequate and swift payment can be provided to victims without litigation.
At the same time, lobbyists for the manufacturing industry worry that the creation of a victims' compensation system might make companies liable for injuries their products did not cause.
"My apprehension is that compensation systems in the past have often been expanded to require persons to pay victims where the defendants were in no way responsible for the harm that victims suffered," said Schwartz.
Although both business and consumer groups are apprehensive about the various congressional proposals, some form of no-fault compensation must be included for a product liability reform plan to be politically acceptable, according to Danforth, the chairman of the Senate committee that oversees such legislation.
A product liability bill without a victims' compensation scheme was backed by business and introduced by Sen. Robert W. Kasten (R-Wis.) in the last session of Congress, but it failed to pass the Senate Commerce Committee. When Danforth recently was asked what the chances were of trying to pass that scheme again without including no-fault compensation, he replied: "My own view is that the chances are zero."