Reforming Liability Law

Liability law is probably the most widely recognized policy instrument that affects private standards-setting. It was an important influence in several of the case studies. The debate over "tort reform" encapsulates the familiar arguments about whether the direct effects of liability law hamper public safety objectives.^[16] The case studies add to that debate by suggesting that liability law has undesirable effects on standards-

setting. At least two reforms seem in order. Both would help ensure that improvements in standards are encouraged, rather than discouraged, by the law. These two changes would probably have a larger impact on private standards-setting than any aspect of the various "standards policies" offered in the past ten years.

First, improvements made in a standard should not be admissible in cases concerning mishaps prior to the improvement . Although there is some support for this position in the law, "the growing tendency," according to UL's general counsel, "is to admit into evidence post-accident revisions to standards."^[17] This can only discourage improvements in standards. UL would be more willing to upgrade its standard for metal chimneys if doing so did not create the implication that thousands of existing chimneys are, by UL's apparent admission, inadequate. Similar concerns were apparent when the NFPA's Agricultural Dusts committee added provisions for motion-detection devices to the appendix of the standard in 1973. These provisions might have been made mandatory but for the implication that facilities without such devices were below the generally accepted industry practice. Protecting standards-setters and businesses against liability for making improvements would certainly advance public safety objectives.

Second, in assessing the reasonableness of the risk attendant to a product or process, the law should consider overall effects, not just specific incidents. In other words, the law should not impose liability when overall social benefits clearly outweigh specific adverse effects. This argument has been advanced in connection with innovation by individual firms such as drug companies.^[18] There are implications for standards-setters as well. The most persuasive reason why AGA did not require the oxygen depletion sensor on space heaters without prodding by the CPSC—a reason never committed to paper in either the public or private proceedings—is that companies were afraid that an occasional failure of the device would create new liabilities. Similar fears have slowed the introduction of other technologies, from vaccines to antilock brakes, that would unequivocally increase overall levels of safety. The perverse result is that standards-setters rationally avoid some actions that would make the world safer because, unfortunately, these actions might also increase exposure to liability.