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Some insurers hungry for premiums might take heart that legislation has been introduced in Congress that would create a new product liability exposure.
New liability exposures, as we have seen time and again, mean new opportunities to develop specialized insurance policies to minimize those risks. Of course, new exposures also mean claims that must be paid, but that's another issue.
Consider the growth in demand for employment practices liability insurance in the wake of the Americans with Disabilities Act, or environmental liability policies designed to address pollution laws.
Despite such precedents, somehow I don't think insurers will rush to market with a product to address this new exposure.
The bill, H.R. 4204, was introduced in the House of Representatives by Rep. Thomas Latham, R-Iowa, on July 14, and quickly gained six co-sponsors.
Colorfully named the "Drug Dealer Liability Act of 1998," the proposal aims to shift the cost of damages caused by illegal drugs to those who profit from their sale. The bill would "provide civil liability for illegal manufacturers and distributors of controlled substances for the harm caused by the use of those controlled substances."
In layman's terms, drug dealers could be sued by people directly or indirectly harmed by the use of drugs and held strictly liable.
Before you imagine a rush of junkies flooding the courts to try and win a jackpot that would finance their next fix, the proposal generally excludes drug users from being claimants. A drug user would sue only in cases where the individual complies with all of the following: discloses information on all his or her sources for illegal drugs; has not used an illegal drug for 30 days before filing suit; and remains free of illegal drugs for the duration of the lawsuit.
The bill's intent is understandable: creating another weapon to stamp out illegal drugs and the harm they cause society.
However, I see several problems with the measure.
First of all, this effort to expand product liability comes at a time when businesses and insurers are struggling to limit the excesses of the civil justice system for legal activities.
Selling "controlled substances" is illegal in this country. Therefore, there already are legal remedies for shutting down drug dealers. If law enforcement efforts are inadequate to the task, do we really think hordes of plaintiffs lawyers can do it?
It also is unlikely that plaintiffs harmed by a drug dealer stand to collect much in the way of monetary damages.
Picture a scenario where a dealer plying his trade is arrested and jailed on criminal charges. Imagine an individual, say someone injured by a car driven by a drug abuser, decides to sue the dealer to pursue compensatory and punitive damages.
Who's going to pay for the dealer's defense? And how will damages be paid? Assuming all his drug profits and assets have not already been seized by law enforcement officers under ill-gotten-gains statutes, what's left is probably not sitting in a bank awaiting a lien. It's unlikely the dealer would pay tens of thousands of dollars to mount a vigorous legal defense, or to make good on court-ordered damages. What kind of victory would that be for the plaintiff?
The biggest problem with the proposal is using the civil justice system as a tool to try to stamp out social problems.
Creating new targeted liabilities to address a specific problem is like trying to squash an ant with an atom bomb: It's overkill; it's liable to get out of control; and it can create additional problems for years to come.
There is no guarantee that the liability will be contained to the uses its framers intended. The precedent set by holding drug dealers strictly liable could be expanded in unforeseen directions until manufacturers and dealers of perfectly legal, though perhaps politically incorrect, products find themselves being hauled into court when a customer misused the product and caused harm to another person without the manufacturer's knowledge or intent.
Of course, that's what happens all too often under the current product liability regime.
This well-intended but misguided attempt to expand liability will only make an already bad situation worse.
Editor Paul D. Winston and Publisher and Editorial Director Kathryn J McIntyre publish columns on alternate weeks.