BUSINESS INSURANCE
March 17, 2008

Product safety measure sparks litigation fears
By MARK A. HOFMANN

Bill would create database for alleged injuries

WASHINGTON—A Senate bill designed to give the Consumer Product Safety Commission more power could increase the product liability exposures of U.S. businesses, some product liability experts warn.

Strengthening the CPSC worries observers less than provisions that would require the governmental agency to establish an easily accessible database of consumer complaints and allegations of injuries, sickness, death or risk of the same related to consumer products. The CPSC oversees the safety of more than 15,000 consumer products.

In addition, the Consumer Product Safety Commission Reform Act of 2008, which passed the Senate on a 79-13 vote earlier this month, would allow state attorneys general to step in on behalf of residents to enforce product safety laws and would provide whistle-blower protection for employees of manufacturers regarding problems along supply chains.

The measure's supporters, however, claim that the concerns are overblown. By encouraging the manufacture of safer products, product liability litigation will actually decrease, they say.

The House passed its version of the measure in November by a vote of 407-0. The House bill, however, contained neither the database nor whistle-blower provisions, and would not give state attorneys general as much power to pursue product safety cases.
Differences between the measures will be ironed out by a House-Senate conference committee later this year. In the meantime, the White House Office of Management and Budget issued a statement supporting the House bill, although it stopped short of threatening a veto of the Senate measure should that bill reach the president's desk.

The database provision is particularly troubling, said Victor Schwartz, a product liability expert and partner in the Washington office of Shook, Hardy & Bacon L.L.P.

The publicly available information would allow "consumer groups and others to make reports to the CPSC that are not confidential, that are mere allegations about product defects but get posted on the CPSC Web site," Mr. Schwartz said. "The bottom line is it creates a shopping mall for plaintiffs' attorneys looking for new cases."

"I think the provision in the statute that establishes a public database of reports received by the CPSC of injuries, illness or deaths or risk of injuries, illness or death is likely to result in some greater exposures of American manufacturers and importers to claims of product liability," said Russell Carpenter, a partner in the Washington office of Covington & Burling L.L.P. "The provision provides plaintiffs' liability lawyers with a new source of leads to identify products that do not comply with federal safety standards" that could lead to big damage awards, he said.

With some exceptions, the Senate bill would require the CPSC "basically to put every consumer and other complaint on a Web site no matter how inaccurate and useless it might be," said Chuck Samuels, a partner and head of the CPSC practice group at Mintz, Levin, Cohn, Ferris, Glovsky and Popeo P.C. in Washington and a member of the National Assn. of Manufacturers' CPSC Coalition. "This would literally be thousands of data points every year. Many manufacturers and retailers would end up being unfairly listed," he said.

"No matter how it comes out, the fact is, even if the House bill became law, you still would have greatly increased enforcement and litigation," he said. "There'll be more recalls, more violations of regulations because there will be many more regulations and the attorneys general provision in either bill certainly will create more investigations and litigation."

"If the goal of the bill is to have the oversight to avoid product failures, that's what we're trying to do—avoid liability and avoid any insurance implications," said Laura Foggan, a partner at Wiley Rein L.L.P. in Washington who represents insurance companies.
Consumer advocates hold that the measure will actually decrease product liability exposure over the long run because it will force the manufacture of safer products.

Business fears are a "red herring," said Rachel Weintraub, director of product safety and senior counsel at the Washington-based Consumer Federation of America. "It gives CPSC more tools to enforce regulations and gives them more regulation to enforce. Ultimately, we're hoping that his bill will result in safer products, which lead to less need for litigation," she said.

"I think the Senate bill is a very strong consumer protection measure that should make for fewer dangerous products and therefore fewer product liability lawsuits," said Pamela Gilbert, a partner in the Washington law firm Cuneo Gilbert & LaDuca L.L.P. and former CPSC executive director.

"The proposed databank will be key to preventing injuries from dangerous products," she said. "There will be a lot of complaints out there that are not about products that are defective. But I believe that consumers and lawyers are smart enough to know the difference."

The increased CPSC funding in the bill would not result in "any additional basis for liability," said Andrew Popper, a law professor at American University's Washington School of Law in Washington. "I think it does what it does—it provides the commission with critical funding and gives it some basis to go forward in a more positive way."

"If people are critical of this, it's just one way to use a public forum to criticize consumer rights advocates otherwise known as plaintiffs' lawyers," Mr. Popper said. The bill "does not increase in any meaningful way the liability of U.S. manufacturers."