Ford's $128.5 Million Headache

The trend is toward huge awards to victims

Richard Grimshaw, 13, was riding with a neighbor on a road near San Bernardino, Calif., six years ago when another auto plowed into the rear of their Ford Pinto. The Pinto's gas tank ruptured, filling the passenger compartment with flames that mortally injured the driver and spread burns over 90% of Richard's body. Since then, the badly scarred teenager has undergone more than 50 operations. When the case went before a Santa Ana, Calif., jury six months ago, the plaintiffs charged that even though Ford's own crash testing had revealed weakness in Pinto gas tanks and excessive gas leakage, the company chose not to spend the $10 per car it would have taken to correct those faults. Last week the jury socked Ford with a $128.5 million verdict: $666,280 to the dead driver's family, $2.8 million to Richard in compensatory damages--and a whopping $125 million in punitive damages for the youth.

Richard's was easily the largest personal injury award in U.S. history, and experts are certain it will be reduced on review or settled at a lesser amount. While acknowledging the anguish of Grimshaw's injury, Ford asserted that the award is "so unreasonable and unwarranted that it will not be upheld." The 1972 Pinto, added the company, "met all applicable federal safety standards. It was not defective in construction or design."

The decision underscores complaints from manufacturers and insurers that rapidly inflating jury awards are getting out of hand. According to the Department of Commerce Interagency Task Force report issued last November, "The law of product liability has become filled with uncertainties, creating a lottery for both insurance rate makers and injured parties." Although the average cost of product liability insurance is now 1% of sales, the rate is more than ten times higher for some small manufacturers of high-risk products, such as trampolines, air rifles and football equipment. An increasing number of companies are "going bare," dropping coverage altogether.

The complaints are part of a chorus of protest against costly personal injury awards especially in product liability and medical malpractice. Jury Verdict Research Inc., an Ohio organization, says that the first such award for $1 million was recorded in 1962. Fifty-nine more were returned in the next ten years, and another 145 in the past five. Under economic pressure, several insurance firms began an aggressive public relations campaign, including up to $10 million worth of hard-hitting "advocacy advertisements" in publications such as TIME, Wall Street Journal and New Republic. The ads point to "windfall awards" and suggest that jurors must eventually pay for them through higher premiums.

Personal injury lawyers are beginning to fight back. Attorneys in New York and California have complained to the Federal Trade Commission, urging that corrective ads be ordered. Two weeks ago, Bridgeport, Conn., Lawyer Theodore Koskoff filed a lawsuit on behalf of four plaintiffs awaiting jury trials, charging the insurance companies with what amounts to jury tampering.

Koskoff's suit points out that in some ads, the insurers claimed 1 million product liability suits are being brought each year; the Interagency Task Force put the figure at no more than 70,000. At least one jury verdict, in a Milwaukee suit, was thrown out because a juror brought an insurance ad into the jury room. Still, says Douglas Alspaugh, Aetna Life & Casualty advertising director, "when you try to affect people's thinking, you can't help whether they take their awareness into a jury room or a cocktail party."

A marked shift in public opinion would be necessary to interrupt the upward cycle of jury awards. Lawyers attribute the rising spiral to increased medical costs, a hostility to well-heeled or corporate defendants, greater sensitivity to the plight of disabled victims and an increased willingness of Americans to bring suit. Insurers are pressing for legislation to ease their burden by shortening statutes of limitation, putting a lid on lawyer contingency fees, and setting up Government reinsurance funds. But plaintiffs' lawyers insist that large awards often benefit society. Says Claremont, Calif, Lawyer William Shernoff: "I've seen case after case in which a company reformed shoddy business practices after being hit with punitive damages. It really works."

Insurance officials wonder. They portray trial lawyers as hired gunslingers who play on jurors' emotions to win unreasonable awards. The lawyers meanwhile paint insurance companies as profit-hungry and indifferent to the welfare of victims. Says Duane Gingerich of The Research Group Inc., a national legal analysis firm: "The enmity between insurers and trial lawyers is deteriorating into trench warfare."

Academic experts believe both sides are overreacting. Says Yale Law Professor Guido Calabresi: "Those ads are outrageously one-sided, even silly. They suggest that the occasional huge jury verdict drives up rates, when the real cause is overpayment of small claims. But the insurers clearly have a First Amendment right to influence legislation." Adds University of Illinois Professor Jeffrey O'Connell: "A court clampdown on advertising is a raw, brutal way of handling the problem. Plaintiffs' lawyers are adequately protected by voir dire [jury selection] procedure." Most analysts doubt the trial lawyers will succeed in muffling the insurers but see the lawyers' maneuvers as effective nonetheless. Says The Research Group's Gingerich: "The insurance companies and trade associations will have to be much more careful in representing the nature and scope of the problem." sb

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