In defense of punitive damages in product liability: Testing tort anecdotes with empirical data.

Rustad, M. L. (1992). In defense of punitive damages in product liability: Testing tort anecdotes with empirical data. Iowa Law Review, 78, 1-88.

The insurance industry, tort reformers, journalists, and some academics claim that punitive damages in products liability are skyrocketing and out of control creating a litigation crisis. Despite the rhetoric, little is known about punitive damages in products liability cases. Does the amount or frequency of punitive damages vary by product category, region of the United States, or severity of injury? Do plaintiffs ultimately collect such awards? What percentage of punitive damage awards are reversed or remitted by appellate courts? Do plaintiffs who settle post-trial prior to appeal receive more than those plaintiffs who do not settle? Before Congress or the states abolish or further restrict the remedy of punitive damages in products cases, these questions should be studied empirically. To test the hypothesis of a punitive damages crisis, I examined the incidence, size, post-verdict outcome and factual foundation for 355 punitive damages verdicts handed down in U.S. state and federal courts over the twenty-five year period from 1965 to 1990. The expansion of punitive damages to punish and deter manufacturers who recklessly or knowingly endangered the consuming public was a development of the late 1960s. The chief empirical findings were that punitive damages were rarely awarded (355 verdicts in favor of plaintiffs in a quarter century), frequently overturned or reduced on appeal (one in two awards), and arose out of predictable and preventable patterns of product manufacturer conduct. Punitive awards in products liability are overwhelmingly the result of (1) fraudulent-type misconduct; (2) knowing violations of safety standards; (3) inadequate testing and manufacturing procedures; (4) failures to warn of known dangers before marketing; and (5) post-marketing failures to remedy known dangers. The central issue in three of every four punitive damages awards in products liability was a firm’s failure to warn of known dangers and the post-marketing failure to remedy product defects. Fraudulent-type misconduct, the knowing violation of safety standards, and inadequate testing accounted for the remainder of punitive damages awards. Punitive damages in products liability were generally awarded for particularly egregious manufacturer conduct. Punitive damages were generally awarded where there was some “smoking gun” showing that a firm concealed, suppressed, or recklessly failed to take remedial action to correct a dangerous product defect. The most common smoking guns involved a firm’s failure to adequately test products, heed field-testing reports showing dangers, or take remedial steps in the face of prior similar injuries, which suggest a tendency to sacrifice public safety for profits. These empirical findings provide little support for the tort reformers’ claim that punitive damages need radical reform.

Conducted extensive search for all product liability jury trials in U.S. that produced punitive damage awards between 1965 and 1990. Overall, 27% of awards associated with asbestos (32% in 1980s) and 20% related to vehicles. Distribution of punitive awards highly skewed.

http://papers.ssrn.com/sol3/papers.cfm?abstract_id=2529126