Business Tort Liability
The present report presents the discussion of the consequent aspects of business tort liability. Firstly, it evaluates the effect of tort liability on the pharmaceutical industry. Secondly, it determines the growth of tort liability and discusses where and why the reform is necessary. Thirdly, the report evaluates the effect of business tort liability on corporate liability. Fourthly, it explains how the impact of tort liability can be decreased with the help of risk management process. Finally, the report discusses how tort liability can escalate to criminal liability.
The Effect of Tort Liability on Pharmaceutical Industry
Tort liability aims to reduce the number of damages the customers can get as well as decrease their negative impact. There are three key principles under which pharmaceutical companies can be liable for damages – strict liability, warranty, and negligence. At the same time, precisely the issue of strict liability is the riskiest since it is very complicated to forecast the impact of medicine on consumers. It means that even if the pharmaceutical company impeccably researched its drugs, in some cases, it would have to pay for damages caused to consumers (Choi & Lee, 2011). As a result, pharmaceutical companies have no choice but to add the additional expenses to the cost of their products that, in turn, increases their final price for the customers. In addition, companies tend not to support the research and production of low-margin and high-liability risk drugs (Jacobi, 2005). This leads to the significant general increase in prices for drugs and affects the consumers negatively. In addition to economic effects, tort liability has an impact on legal features. For example, tort system requires too high transaction costs while payments for pain and suffering in the majority of cases are random and have no positive impact on safety. Eventually, it increases the liability insurance costs for doctors to an inappropriate level that, in turn, leads to the necessity to restrict their practices (The Congress of the United States, 2004). Therefore, the effect of tort liability is controversial since it has a number of negative aspects both for pharmaceutical companies and consumers.
The Need for Tort Reform
The issue of tort reforms gained its prominence in the middle of the eighties of the twentieth century in response to a consequent problem with insurance costs. The key aim was to limit the exposure to liability with the help of consequent reduction of insurance premiums. As a result, in 1987, insurance premiums decreased by 40% in comparison to the beginning of the eighties (The Congress of the United States, 2004). Since 1986, many states enacted different tort reforms. For example, 38 states modified joint-and-several liability, 25 states modified the collateral source rule, 23 states limited noneconomic damages (caps varied from $250.000 to $750.000) while 34 states limited punitive damages (caps varied from $250.000 to $10 million) and outright bans (The Congress of the United States, 2004). At the same time, the first decade of the twenty-first century has shown a negative tendency for small …
