Product Liability

Product Liability

Introduction

Product liability is an important area of the U.S. legal and regulatory systems, but it is also an area deeply informed by sophisticated risk and economic concepts. The next section considers some fundamentals of product liability in the law and regulations. This is followed by a section that addresses product liability in the context of enterprise risk management (ERM). Modern ERM emphasizes a proactive product liability focus for enterprises in a world with many different types of risks. For that reason, there are inexorable links between ERM and the incentives and penalties inherent in the legal and regulatory structures under which enterprises operate. Within the ERM context, the process of managing product liability includes steps to identify and classify risks; to quantify risks using several risk metrics; to monitor risks; and to implement strategies for risk reduction, integration, diversification, and transfer. This chapter links these concepts to a changing product liability landscape that is increasingly being reflected in the law and marketplace (Rostrom, 2004). In this paper, we would be discussing the case of Philip Morris and other tobacco companies regarding tobacco and health.

Discussion

Tobacco companies, Like Philip Morris have fended off nearly all litigation, despite dozens of studies that have amassed since the 1950s linking cigarette smoking to illnesses such as heart disease, emphysema and lung cancer. Hundreds of suits have been filed against the tobacco industry by people who claim that the industry is at least partly responsible for their smoking-related diseases. Yet for most of the past four decades, the industry has not paid a penny in damage awards. Only recently has that success record been threatened, as an unprecedented wave of tobacco litigation has emerged over the past several years and at least one large firm has moved to settle tobacco-related claims (Goldberg & Zipursky, 2010).

Philip Morris is facing a flurry of legal attacks from many different angles. The tobacco industry itself continues to defend itself against suits filed by individuals suffering from smoking-related illnesses, but a growing trend is for groups of individuals to unite in class-action suits against tobacco firms. In a class-action suit, an individual plaintiff sues on behalf of all those who have the same legal dispute, and any decision in the case applies to all of the individuals involved. Because individuals in class-action suits can combine their resources and money, they can more easily match the legal and financial resources available to large companies.

U.S. states are filing another type of lawsuit against the tobacco industry. As of January 2007, 21 states had filed separate lawsuits against the industry, seeking to recoup public health-care costs related to treating people who suffer from smoking-related illnesses. The states claim that while tobacco companies have gotten rich by selling cigarettes, states have shouldered the immense economic and health-care tolls that are a result of a thriving tobacco industry (Miller, 2009).

Among the anti-tobacco groups that support state and individual lawsuits against the tobacco industry are the American Cancer Association, the Tobacco Products Liability Project, ...