Manufacturing defects, Design defects, Marketing defects, Defective product designs, Consumer expectations test, Enterprise liability, Strict enterprise liability
Consumer Protection Law | Litigation | Marketing Law | Torts
American courts talk as though they are imposing strict enterprise liability on product manufacturers, but in truth they do so only with respect to manufacturing defects. In product design and marketing litigation, manufacturers' liability is based on fault. The reason why strict liability is inappropriate for the generic product hazards associated with design and marketing is that, in sharp contrast to manufacturing defects, the conditions necessary for insurance to function are not satisfied. Users and consumers control generic product risks to a sufficiently great extent that any insurance scheme based on strict enterprise liability would be destroyed by combinations of adverse selection and moral hazard. And yet, here and there, courts are imposing strict liability for harm caused by manufacturers' design and marketing decisions. These "echoes of enterprise liability" involve unique fact patterns in which adverse selection and moral hazard do not threaten the viability of the insurance schemes implicit in liability without fault. In reaching these remarkable outcomes, courts stretch existing doctrine beyond traditional limits. Understanding why these echoes arise and how they rest on unique factual circumstances should help prevent misunderstandings regarding their value as guides to future developments in American products liability.
Henderson, James A. Jr., "Ethics of Enterprise Liability in Product Design and Marketing Litigation" (2002). Cornell Law Faculty Publications. Paper 811.
Published in: Cornell Law Review, vol. 87, no. 4 (May 2002).