But accountability for a company's behavior should rest on decisions about risk and cost, not on whether a company has performed a risk analysis. Would the risk analysis alone make jurors more likely to conclude that the corporation acted recklessly by placing overly risky products on the market? The company's risk analysis, which showed that the benefits of the safety improvement did not outweigh the costs, should not only eliminate the possibility of punitive damages, but also eliminate claims based on negligence.
There are no existing legal provisions indicating that companies should be penalized for carrying out a risk analysis.
THE JUROR JUDGMENT SURVEY
The first broad category consists of two scenarios in which the company has not performed a risk-benefit analysis of the product. In Scenario 2, reproduced in the text above, the scenario details were the same, except that the cost per life saved was $1 million. Overall, the scenarios in which a company conducted an analysis led to a punitive damages award 94% of the time.
For the two scenarios in which the company does not undertake a benefit-cost analysis, the value of the prices is almost identical.
THE RISK-BALANCING REFERENCE POINT
The jury was somewhat more likely to award punitive damages in the faulty analysis case (0.95 probability versus 0.93), but was somewhat less likely to penalize the firm ($4.5 million in punitive damages for Scenario 5 versus $5.3 million for Scenario 4). More detailed statistical analyzes that control for variations in scenario characteristics and respondent characteristics yield similar results.21 By taking into account the influence of mock lawyers' personal characteristics, such as gender and education, undertaking a risk analysis increases the likelihood of a punitive damages. award by 5%. Undertaking a benefit-cost analysis of risk does not help the company, but instead increases the punitive damages awarded by 47%.
The cost per life saved and the absolute level of risk do not significantly influence jury behavior.
Risk Analysis and Liability
These conflicting concerns appear in the American Law Institute's discussion of the role of the actor's knowledge as an integral part of risk analysis: "However, if the evidence shows that the actor knew that his conduct was harmful, that evidence leads to a finding that the actor's failure to take precautions is very obvious for the purposes of companies, but of course they can carry out a risk analysis and adopt behavior that they do not see as harmful. However, juries may disagree and if a company is found negligent, then its risk analysis and awareness of the risks, represented by dangerous products may trigger punitive damages. The expected benefits of a safety device are equal to the change in the probability of death multiplied by the value of preventing the consumer's death.
By using the information that was reasonably available at the time of the risk analysis, the company can evaluate the change in the probability of death that would result from a specific safety improvement.
Setting a Price on Safety
In terms of lifetime value, these amounts imply a lifetime value of $3 million to $7 million, or a midpoint value of $5 million per statistical life. For the purposes of the discussion below, this willingness-to-pay approach will be the measure used to determine the value of life. But compensatory damages awarded by courts in this way do not serve the preventive function reflected in the value-of-life statistics.
A life value figure of $5 million is an appropriate reference point for determining how much the company must spend per statistical life to prevent an expected death, even if a typical wrongful death court award is less than $1 million.
Problems in Ex Post Jury Assessments ofRisk Analyses
Because the people whose lives are at risk have the most to lose, the usual reference point for valuing safety is the willingness of the person at risk to pay for safety. The value-of-life numbers are significantly higher than the estimates obtained using only the present value of lost earnings, often called the "human capital" approach. When making awards in wrongful death cases, courts focus on the present value of future earnings, net of consumption of the deceased and, depending on the jurisdiction, taxes.
That amount of money is needed to compensate the economic loss to the family based on the deceased's income. Although witnesses may talk about them, they are ghostly figures, insubstantial compared to the injured plaintiff, who appears in the flesh.33. The McMahons' lawsuit against the coffee maker manufacturer alleged that the machine was defective because the coffee was too hot.
From a practical perspective, consider the process a company might undertake if it wanted to make a comprehensive assessment of the costs and benefits of a particular safety improvement. It would provide a thorough understanding of the risks involved and how the safety apparatus would impact these risks. In order for the suspect's behavior to be deemed to have been intentional or wanton, his/her actions must have been committed under circumstances showing that, based on his/her knowledge of the existing circumstances, he/she was aware that it was likely that harm would result from his/her acts and omissions, and nevertheless proceeded with reckless indifference to the consequences and without concern for rights.
It is sufficient if the plaintiff proves by the greater weight of the evidence that the defendant acted intentionally in such a way that the natural and probable consequence of his action was damage to the plaintiff. 36. Will a jury find that the defendant's conduct was reckless and caused an injury to the plaintiff because the defendant chose not to take the safety measure despite knowing the negative consequences.
Risk-Utility Analysis
Risk Analysis After Accidents
BENEFIT-COST ANALYSES AT FORD MOTOR COMPANY
Ford's Seatbelt Failures
PRODUCT-RISK ANALYSES AT GENERAL MOTORS
In a 1973 analysis, GM engineer Edward Ivey produced a benefit-cost analysis of the fuel-fed fire mortality issue.73 It is instructive to review this analysis in detail. It is worth noting that this analysis pertains more generally to fires being conducted, and not to those in the specific target population of vehicles that were the subject of the litigation. Accordingly, the Ivey memo is not directly pertinent to the specific aspects of the Moseley case, except insofar as the memo indicates the character of corporate thinking.
As in the case of the Ford Pinto analysis, the $200,000 per fatality value uses a life value compensation measure, which was NHTSA's approach at the time. This amount is lower than the measure of willingness to pay the value of life, which was later developed in the economic literature.76. GM's approach was consistent with the state-of-the-art research on life value estimates at the time.
In the 1970s, the dominant approach to measuring the value of life was the human capital method, which focused on the present value of the deceased's lost earnings. For example, using data from the early 1970s, the estimated willingness-to-pay measure for the value of life is $3 million in recent dollars, or $1 million in 1969 dollars. However, using the willingness-to-pay measure of lifetime value, the benefits exceeded the costs.8 0 For all contemporary benefit-cost analyses, one would expect the lifetime value measure to reflect the willingness-to-pay value, as in scenario 4.
The basic facts of the case are similar to those of many other bum injury cases. The analysis that led to the adoption of the value-of-life principles in the federal government is in W.
PHARMACEUTICALS-RISK ANALYSIS WITH GOVERNMENT SUPERVISION
Moreover, we are of the view that the principle of strict liability generally applies to manufacturers of prescription drugs."). Indeed, in 1985, total prices for the pharmaceutical industry exceeded prices for the rest of the manufacturing sector. Important lesson of the pharmaceutical experience is, that formalizing a legal compliance defense could serve a constructive role.
A major puzzle posed by the performance of the courts is that many of the best known cases involving damages are also those in which companies have carried out a risk analysis, or in some cases a thorough benefit-cost analysis. Or perhaps jurors do not adequately try to put themselves in the company's shoes at the time of consideration. At the time of the decision, the company only sees a small chance of an accident, no certainty.
For the Ford Pinto, the comparison is between a cost of $11 per car to move the gas tank and the life of the victim of an exploding Pinto. It is noteworthy that in the survey scenarios in which a benefit-cost analysis was provided and the appropriate value of life was used, the costs of the safety measure exceeded their benefits. But to undertake this kind of responsible risk analysis suggests that the company knew about the risk and deliberately inflicted it on a probabilistic basis, thereby triggering punitive damages in the view of the mocking jurors.
It would not be appropriate for a company to be exempt from punitive damages simply because it has carried out a risk analysis, as the quality and adequacy of the analysis may be insufficient. In terms of racial background, 80% of the sample was Caucasian, 5% Hispanic, and the remainder represented other minorities. The largest educational group represented was the group of people with higher education; this group comprised 40% of the sample.
These effects are nearly identical to those reflected in the summary of overall sample mean effects in Table 3 .
