Imagine a system of contractual or elective no-fault with respect to product-rel
ID: 122169 • Letter: I
Question
Imagine a system of contractual or elective no-fault with respect to product-related injuries. Manufacturers would offer with their prod- ucts schedules of benefits that they would pay if consumers should be injured while using the products. In the event of an injury, there would be no inquiry into the product’s defect or the user’s fault; benefits would simply be paid to the injured consumer according to the contractual schedule. Pain and suffer- ing would not be compensable; collateral benefits would be deducted; and a few other restrictions would apply. Those manufacturers who chose not to of- fer elective no-fault would still be strictly liable for product-related injuries under the current system. Explore the efficiency of this elective no-fault sys- tem.
Explanation / Answer
This kind of system will be useful as it will result in improvement of product quality. If manufacturer will have to compensate for injury occurred with his product, they will try to avoid such compensation by improvement of product quality. But in order to attain better quality, there will be addition in the cost of the product which can be higher than the insurance.
Another issue is that, if a person buys a product without no-fault system as it will be less in cost compared to a no-fault system complying product, in this case if a third person gets injured, he will have to suffer with the decision of the above person. Also if there is no check, it is a possibility that a manufacturer has to pay for an injury which was caused due to some other reason, may be due to other product or person’s fault.
Although the manufacturers who have to pay for the injury will emphasize on the product quality and can reduce the cost of insurance to avoid such compensation.