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The Dangers of Liability Caps (Part A)

Liability caps have been in place for many years in U.S. legislation for select industries including manufacturing, oil drilling, and medical malpractice. The basic purpose of liability caps is to prevent the non-economic damage portion of a lawsuit settlement from becoming inappropriately costly.

Many of the liability caps in place currently are reflective of past case settlements with abnormally high non-economic damage awards. These sorts of case settlements were considered inappropriate or frivolous and liability caps were put in place to stop future occurrences.

How Liability Caps affect a Business

Liability caps were set in place to help protect businesses from the danger of being "taken for all they're worth" in the event of a serious issue such as product liability, medical malpractice, or a severe accident. As more consumers became aware of their rights to a lawsuit should they be harmed by a business's negligence, the more lawsuits began to arise asking for abnormally high non-economic damages.

Liability caps put a threshold on how high these "pain and suffering" parts of claim settlements could go. This protected the business from the threat of a limitless value the jury could potentially award the plaintiff for their case settlement.

At face value, it seems like things were fine now - businesses didn't have to worry about going bankrupt from a single lawsuit and consumers could still file for some non-economic damages in their case settlements.

One of the main concerns with liability caps and how they affect businesses is that if a company knows it can only be sued for a certain amount, they can use that amount to weigh the cost effectiveness of safety measures. Take for example an oil drilling company:

  • The oil company should be replacing a set of safety valves on its drilling rigs every 6 months.
  • The cost of this replacement is $500,000 per valve and there are 20 valves making a total cost of $20 million per year per rig.
  • The oil company operates 5 rigs, so the annual cost of replacing the safety valves on all their rigs is $100 million.
  • The liability cap for an accident is $75 million.

In this scenario it would actually cost less to forgo the additional safety measures and risk a lawsuit rather than perform the recommended maintenance every 6 months. In a world where the bottom line is all that matters, many companies have been found to be cutting corners on safety measures in order to save money.

Many believe that this lack of safety concern can be attributed to the limited risk of financial damage from a case settlement. If there's little financial risk to being lax on safety measures, why bother? We as consumers are worried that this may be a motive in the back of many industry minds, especially when it comes to doctors and medical malpractice.

Keep reading to see how the imposing of liability caps can directly affect you, the consumer, which can help you decide if you need a Virginia Personal Injury Lawyer.

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You can order a free sample chapter of our free consumer guide, Why Most Medical Malpractice Victims Never Recover a Dime, to learn more about medical malpractice

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Ben Glass
Ben Glass is a nationally recognized Virginia injury, medical malpractice, and long-term disability attorney