Risk/Utility Analysis
Risk/utility analysis then developed out of the same balancing reasoning,
applied to determine liability in the area of product design. In these types
of cases, courts must determine whether a manufacturer should be held
liable if goods are "imperfect" as a result of production or distribution.
In past cases, courts had difficulty in this area. In Greenman v. Yuba
Power Products, Inc.,42 a 1963 case, the court stated that the defendant
was not able to see the possibility for injury until after the injury
occurred and by traditional negligence standards should be found not
liable.43 This type of conclusion troubled the courts, since the burden
on the plaintiff seemed almost insurmountable.
There were a number of reasons why this type of finding was unfair.
First and foremost, companies' manufacturing operations are the party in
control of the product from its inception. Manufacturing divisions have a
chance to monitor design and distribution and therefore seems the
logical party to be held liable if the design of its product leads to an
injury. However, it seems illogical for the consumer to bear the burden
of a harm it had absolutely no control over. Also, requiring
manufacturers to be liable for their products makes them take more
precautionary measures, the cost of which can be spread out in the price
of its products to the consumers who make use of them.44 The problem
was the same, however. Where is the middle ground between the earlier
standard and absolute liability and how is it defined?
The first step in finding this middle ground in manufacturing liability
cases was to remove requirements of warranty and privity of contract
that manufacturers used to escape liability in the past. 45 In Greenman,
the court stated that removing the obstacles earlier set by warranty law
put manufacturer's liability in the correct realm. This area was "not one
governed by the law of contract warranties but by the law of strict
liability in tort ... A manufacturer is strictly liable in tort when an article
he places in the market... proves to have a defect that causes injury to a
human being."46 The obvious question therefore was, what is a
"defective product"?47
The definition provided by section 402A of the Second Restatement of
Torts assigned strict liability to products with "a condition not
contemplated by the ultimate consumer, which will be unreasonably
dangerous to him ... Many products cannot possibly be made entirely
safe for all consumption, and any food or drug necessarily involves
some harm, if only from overcomsumption."48 Obviously, there was
intended to be some leeway short of strict liability for manufacturers, but
there was still no clear answer as to what was defective and what was
not.49
Attempting to end the frustration and quantify "defective product,"
courts started to turn to a risk-utility balancing similar to Judge Learned
Hand's "BPL Formula." This evolved into a balancing of the benefits of
the product against the risks and the cost of avoidance. In Caterpillar
Tractor Co. v. Beck,50 the court stated the jury could be instructed a
product is defectively designed if "the plaintiff proves that the product's
design proximately caused injury and the defendant fails to prove in the
light of relevant factors, that on balance the benefits of the challenged
design outweigh the risk of the danger inherit in .such design." 51In
Turner v. General Motors Corp,52 the court stated that "a defectively
designed product is one that is unreasonably dangerous as designed,
taking into consideration the utility of the product and the risk involved
in its use."
After long debate, the courts have settled upon this risk/benefit analysis.
For a defendant to be found liable, its product must be determined to be
defective. A defect can take three forms: a defect in design (as was
alleged against the Ford Motor Company), a defect in manufacture, or a
defect in warning. In Ford's case, if the design is found to be defective,
the company would be held liable. The question remains, what makes a
design defective?
While not stated neatly in algebraic terms, such as in the BPL analysis,
this entails a balancing of utility and risks. This standard is not easily
quantified and must be decided on a case-by-case basis by juries. They
must decide in each instance whether the risks associated with the
product are reasonable for society to absorb given the benefits of the
product. Therefore, the duty of the jury is not to decide whether the
conduct of the manufacturer is reasonable, but whether the product, after
the full ramifications are revealed, is reasonable. The difference is that
risk/utility analysis requires a determination of the costs, risks and
benefits of society's use of the product as a whole, while the 13PL
cost/benefit analysis entailed determining the costs and benefits of
preventing the particular accident. In the end, the risk-utility's primary
duty is to establish a threshold of acceptable risk that every good must
equal or exceed, a threshold that can rise with changing social and
commercial experience. This leads to a economically efficient use of
resources and overall wealth maximization.
