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9.2 Product Liability Tobacco Industry

Knowledge of basic product liability concepts is crucial in order to understand the complex
issues involving tobacco litigation.

A consumer who sustains personal injuries due to the use of a defective
product is allowed to seek compensation through the judicial system.
Remedies available to an injured consumer fall under the following areas:

1.Warranties
2.Common law of torts
Negligence theory
Strict liability
3.Federal and state statutory provisions

Warranties:

Under Article 2 of the Uniform Commercial Code, a suit for breach of warranty may be filed
provided that five crucial elements are established.

1.Existence of warranty
2.Condition of goods was different from that outlined in the warranty
3.Injury was the result of deviation (breach of warranty)
4.Amount of damage can be established
5.Facts associating sustained damages to breach of warranty are sufficient enough to
overcome defense

Key point: Statute of limitations on breach of warranty claims extends four years from
delivery of product.

In Cipollone vs.Liggett Group Inc.., the plaintiff accused the cigarette
manufacturer of breach of express warranty. Several advertisements for specific brands of
cigarettes were presented as evidence indicating that Liggett Group Inc. made explicit health
claims, one of which stating "you can't buy a better cigarette" (Daynard, 54).

The difficulty in filing a breach of warranty claim against a tobacco manufacturer is that the
statute of limitations often expires long before the consumer is even aware of the injury.


Common Law of Torts:

An injured plaintiff may base a product liability claim on either negligence or strict liability
theories. Although one may seek damages for intentional tort, this is not a remedy often used
in product liability cases.

Negligence: Injured consumer must prove that, in the design or manufacture of the
product, the conduct of the manufacturer was unreasonable. Damages awarded in
product liability claims are for injuries sustained as the result of design of the product.
Strict Liability: Under the Restatement (Second) of Torts, section 402A (1965), a
manufacturer may be strictly liable if it sells any product in a defective condition
unreasonably dangerous to the user or consumer or to his property and is subject to
liability for physical harm thereby caused to the ultimate user or consumer, or to his
property, if a) the seller is engages in the business of selling such a product, and b) it is
expected to and does reach the user or consumer without substantial change in the
condition in which it is sold.

As applied in product liability cases, the strength of strict liability tort theory lies in proving:

1.the existence of a defect
2.the product is "unreasonably dangerous".

Defect defined:

1.A product may be found defective if it fails to perform as safely as an ordinary consumer
would expect.
2.A product may be defective if the risk of danger inherent in the challenged design
outweighs the benefits of the design. ("Strict Products Liability")

In product liability suits, defects may be the result of manufacturing, design, or may be the
result of the manufacturer's failure to warn the consumer of the dangers inherent in the
product. According to David Ellington (1985), there is considerable question as to whether
failure to warn defects should fall under strict liability. He states, "In both the design and
manufacturing defect cases, the manufacturer's knowledge of a defect is irrelevant because
strict tort liability focuses on the condition of the product, not the manufacturer's conduct.
This is not true in the failure to warn cases". However, he claims that public policy supports
the application of strict tort theory primarily because "the manufacturer is in a better position
to spread the costs of injuries due to its products".

Plaintiffs have experienced considerable difficulties in proving that cigarette
manufacturers failed to warn them of the dangers of tobacco usage. The defense often fights
failure to warn cases with arguments focusing on the consumer's assumption of risk and
contributory negligence.

See also Medicaid Third-Party Liability Act

"Unreasonably dangerous" defined:

The Restatement of Torts defines an unreasonably dangerous product as one that is dangerous
beyond the expectations of the ordinary consumer.


Federal and State Provisions:

Legislative measures, such as the Consumer Product Safety Act, help to protect consumers
from potentially dangerous products.


FAILURE TO WARN

"A cigarette manufacturer has a duty to warn about the health hazards
of smoking when it knew or should have known that cigarettes were
hazardous or potentially hazardous" (Daynard, 50).

The passage of the Cigarette Labeling and Advertising Act required cigarette manufacturers
to warn consumers of the risks associated with the use of their product. Although it was an
attempt to inform consumers of the dangers of tobacco usage, it also served to protect the
tobacco industry against liability. Indeed, the federal labeling requirements have seemed to
strengthen the tobacco industry's position against tort claims. In case after case, the defense
argued that because consumers had been notified of the dangers of tobacco usage they
assumed the risk associated with its use.

However, the existence of manufacturers' warnings does not preclude application of product
liability principles. If the warning can be proven inadequate, the courts may find failure to
warn constitutes a substantial claim under tort law. In order to avoid litigation under failure
to warn, a manufacturer's warning must be "clear and understandable, calculated to tell the
user the full extent of the danger, prominent, comprehensive, intense enough to communicate
the nature of the risk, and not watered down." (Daynard, 1988).

As of 1996, the Surgeon General's Warning obtained from a single pack of
cigarettes reads: "Surgeon General's Warning: Quitting Smoking Now Greatly
Reduces Serious Risks to Your Health." The Surgeon General's Warning as it appears
on a can of smokeless tobacco states "Warning: this product is not a safe alternative to
cigarettes."

Prior to 1985, the warnings on tobacco packages were general and lacked identification of
specific tobacco related diseases. In October 1985, federal law required manufacturers to
include in the warning a statement indicating consumers may develop heart disease, lung
cancer, or emphysema as a result of the use of the tobacco product. Failure to warn may be a
viable claim because consumers are warned only of the possibility of developing these
specific diseases. However, it is apparent from the most current warning that consumers are,
in fact, not warned of the significant dangers of smoking. In addition, consumers are not
warned of the possibility, or probability, of addiction. See: The Brown and Williamson
Documents

DESIGN DEFECT

As introduced earlier in this report, many states are attempting to recover substantial amounts
of money for treatment they provide to Medicaid and Medicare patients suffering from
tobacco related illnesses. Six states, including Mississippi and Massachusetts, have initiated
lawsuits against the tobacco industry, and the state of Florida has successfully enacted
legislation that will aid in recovering costs incurred in treating Medicaid patients.

Under the Medicaid Third-Party Liability Act, Florida is allowed to file claims against any
product manufacturer to collect reimbursement for treating product-related injuries. It is
important to note that the Third-Party Act pertains only to claims made by the state, not those
made by private individuals. In addition, the state must be seeking reimbursement for only
those expenses incurred as a result of treating Medicaid patients. From: Harvard Law
Review. Vol. 108, Dec. 1994, pp. 525-530.

According to an article published in the Harvard Law Review, the Medicaid Third-Party
Liability Act is based on three important provisions.

Abrogation of common law defenses

The Third-Party Act specifically abrogates the key defense strategies of the tobacco
industry, namely assumption of risk and comparative negligence. As a third-party, the
State does not directly assume the negligence associated with an individual's decision to
smoke. Harvard Law Review: "Individual smokers may have assumed the risks of
smoking, or contributed to their illnesses through their own negligence, but the State
assumed no such risk and was not negligent in the transaction between cigarette
manufacturers and consumers" (528). The existence of a public health insurance system,
such as Medicaid, preempts the State's ability to refuse to treat individuals diagnosed
with smoking related illnesses. Therefore, the State involuntarily assumes the risks
associated with smoking as a third-party (528).

Use of statistical evidence to prove causation and damages.

This is a significant development in tort law as it applies to product liability. The State
will not be required to identify individuals, but it must show that the injuries and
diseases it was forced to treat occurred to the aggregate. Harvard Law Review: "In
order to establish the existence and magnitude of the harm to its taxpayers, the State need
not show, nor should it be required to show, that any particular Medicaid smoker was
part of the aggregate excess mortality and disease attributable to smoking-related
diseases" (528). The use of statistical evidence is relevant and will sufficiently establish
the degree of harm suffered by the State.

Imposition of market share liability.

Individual lawsuits clearly identify which tobacco company is being held liable for
damages. In contrast, the Third-Party Act requires damages be assigned based on each
company's market share percentage of the entire damage amount. Harvard Law Review:
"The critical damage is each manufacturer's aggregate contribution to the total damage
done, not the identity of the particular smokers who were, from the State's perspective,
merely the instruments with which cigarette manufacturers inflicted harm upon the State"
(529).

From: Harvard Law Review. Vol. 108, Dec. 1994, pp. 525-530.

Since the enactment of Florida's Medicaid Third-Party Liability Act, there have been many
unsuccessful attempts by the tobacco industry to overturn the law. Apparently, the industry
was aware not only of the immediate monetary cost, but also of the precedent that would pave
the way for many other states. According to a March 11 issue of Time, the industry would be
responsible for reimbursing Florida between $300 million and $800 million per year for
Medicaid expenses. Shortly after the Act was passed, the tobacco industry filed suit to repeal
it and began to engage in extensive lobbying. Governor Chiles vetoed the legislature's repeal
in 1995, and on March 13, 1996, the legislature was unsuccessful at overturning the
governor's veto. From: Gleick, Elizabeth. "Tobacco Blues." Time. March 11, 1996.