Every 2 seconds in America, a new civil liability lawsuit is filed. The total annual cost to our economy for liability lawsuits is a whopping $246 billion—that’s twice the amount Americans spend annually on new cars and trucks. And according to the President’s Council of Economic Advisors, up to two-thirds of that price tag is made up of unwarranted or frivolous costs. This presents a big problem to the auto industry, which has to deal with some inherent unfairness in the system when defending itself against product liability suits.

 

For example, the law allows for consumers to sue an automaker on the basis of a vehicle’s crash-worthiness; however, in 32 states, juries are not allowed to hear that the plaintiff was not wearing a seat belt at the time of the crash. And in many states, even if an automaker is deemed 2 percent responsible for a plaintiff’s injury and someone else is deemed 98 percent responsible, the automaker is liable to pay 100 percent of the damages. This “joint liability” means the party with the deepest pockets has to pay.

 

Chrysler Group President and CEO Dieter Zetsche was recently quoted in the media about what he calls “jackpot justice.” He cited a recent judgment against the Chrysler Group, in which it was ordered to pay $50 million after a 17-year-old driver fell asleep at the wheel and ran into a Dodge Caravan at 70 mph. An unbelted woman in the rear seat of the van slammed head-first into the driver and was killed. Although the Chrysler Group was sued, the driver who caused the accident was not. (The company is appealing the verdict.)

 

The problem, other than the time and money involved in defending itself, Zetsche said, is that potential liability suits discourage innovation because new technology is used as evidence in court that “we knew that our old system was deficient.”

 

“We’ve been sued for not having air bags and for having air bags—and for not retrofitting old air bags with new air bags,” he said. “If that logic was used in the computer industry, we’d all still be using Commodore 64s.” Steve Hantler, Chrysler Group’s Assistant General Counsel for Government and Regulation, directs the company’s Class Action Group, Consumer Litigation Group, litigation communications function and legal reform activities. “When plaintiffs, lawyers and clients use the legal system to strike it rich rather than to seek fair compensation and justice, you get lawsuit abuse,” he said.

The Chrysler Group is working with other companies, nonprofit groups and citizen coalitions to restore fairness and predictability to the civil liability system without restricting access to the courts for legitimate claims, Hantler said. Reform is being made on a state-by-state basis, according to Hantler, who says conditions are improving in Michigan, Alabama, Texas, Mississippi and Ohio, but more reform needs to happen in other states and on the federal level, he adds.

“This not only affects big companies, it affects consumers as well,” Hantler said. “That $246 billion is paid for by higher prices in everything we buy. Employees lose when companies are forced into bankruptcy by outrageous claims, and investors lose because these lawsuits hurt shareholder value—nobody escapes injury.” Zetsche added that the Chrysler Group wants to protect its customers, but unwarranted claims that make plaintiffs rich benefit the trial lawyers’ industry more than the consumer.

Until the government reforms this system, Zetsche is urging other automakers to “fight back aggressively” even when it’s cheaper to settle, which is the Chrysler Group’s policy when faced with “jackpot justice.”

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