Product Liability and Innovation: Managing Risk in an Uncertain Environment (1994)

BRUCE E. PETERMAN

General aviation aircraft, which range from single-engine propeller aircraft to jets that fly higher than, and as fast as, commercial airliners, are a vital part of the national transportation system of the United States and of most foreign countries. The industry meets a need for business and personal transportation that cannot be filled by commercial airliners, trucks, or automobiles. Currently there are 200,000 general aviation airplanes in service meeting these transportation needs, contributing to the manufacturing and service industries in the United States, and fulfilling many training and utility roles.

The largest segment of general aviation, piston-engine-powered aircraft, is now either out of production or produced in very small numbers. In the late 1970s, that segment gained 10,000 to 15,000 new airplanes per year and accounted for more than 100,000 jobs. Now, barely 500 new piston-engine-powered airplanes are produced each year. Also, since at least 30 percent of U.S.-produced general aviation aircraft had been exported, another offshoot of the decline in production is that this important contributor to the U.S. balance of trade has been lost. The need for new aircraft is critical, not only because of the age of the fleet, since few replacement aircraft have been built since 1985, but also because enabling technological innovation could produce safer new aircraft.

A major contributor to the virtual termination of production and the most significant deterrent to rebuilding this industry is the high cost of product liability. This outcome is certainly different from the intended goals of product liability, namely, compensating for injury and encouraging safety improvements.

Among fields of engineering, aircraft engineering is unique in many respects. Since the ability to fly defied man for centuries, the fairly recent capability to fly and even extend flight beyond what was ever thought possible, makes aircraft engineering particularly fascinating. The aircraft engineering task is complex, involving multiple disciplines and principles. Furthermore, because a large number of components are furnished by outside suppliers, aircraft engineering functions are widely dispersed, making detailed technical coordination between companies essential.

General aviation aircraft engineering is also unique from a safety point of view. Safety always has been an important consideration throughout the industry. Many engineers are also pilots or passengers with their families in the aircraft they design. The result is an attention to detail even beyond that normally attributed to an engineer. Potential and actual failures have always been studied to help develop improvements in safety. In addition, aircraft design, manufacture, quality assurance, maintenance, and operation are all regulated by the U.S. government, and safety is paramount in all the regulations. These regulations are detailed not in a few pages, but in a series of books. Aircraft that are manufactured for export must also meet strict foreign requirements. Thus, safety is both an inherent aircraft engineering concern and a requirement for certification.

Given this attentiveness to safety issues, it would appear that product liability, and the advent of strict liability in particular, should have had little impact on aircraft engineering. Nothing could be further from the truth.

On the positive side, while it is true that aircraft engineering concern for flight safety and accident prevention has always been paramount, more attention is now focused on failure modes and effects analyses and on crashworthiness. Also, those engineers who have experienced the extreme scrutiny of depositions and trial testimony have become better engineers. Unfortunately, these benefits are offset by the negative impacts of the current product liability environment, particularly in seven areas: engineering resource allocation, documentation, joint research efforts, design, product-related publications, certification, and regulation.

Considerable manpower is being diverted from innovative and advanced design activities to the preparation of records needed to meet product liability-related demands. This includes producing support documents

for various forms of discovery and preparing defense information, often for frivolous lawsuits. In some cases, such documentation consumes 20 percent of engineering staff time. Total product liability-related expenditures (outside litigation expenses and losses) can surpass 50 percent of the entire product line engineering expenditures for design, development, and certification of new or derivative products and product improvements.1 There is an obvious, negative impact on innovation and product development.

Requests for documents and information from the plaintiff's legal counsel are usually structured in the broadest possible terms, requiring lengthy literature searches of all documents, correspondence, notes, and reports. For example, if a piston engine connecting rod failed due to a lack of lubrication, a typical request for information would most likely include any and all correspondence, certification reports, test information, service reports, and service literature relating to any and all connecting rods and oil and lubrication systems. The initial search would serve as a stepping stone from which to request additional broader information and to launch conjectural failure scenarios aimed at some alleged design shortcoming. The emphasis would not be to determine the actual cause of the failure, but to develop a chain of occurrences that might have happened and to incriminate a defendant with deep pockets. As a minimum, this causes a one-time diversion of a significant amount of engineering time in order to respond to hypothetical considerations and, at worst, could cause inappropriate regulatory changes and lengthier diversions of attention from engineering matters.

Heightened scrutiny of the engineering process resulting from product liability cases has substantially affected the documentation of that process. Correspondence, reports, change notices, and service literature are now proofread with an eye toward downstream interpretation and implications. Older documents are particularly problematic. When those documents were prepared, they contained much of the thought processes and suppositions that went into the decisions made. No thought was given to the possibility that later they would serve as an entrance into the technical depths of the organization through cross-examination by a plaintiff's counsel. The statements in the older documents are not incorrect, just inappropriate given the latitude for interpretation allowed in the present liability environment. Thus, engineers are diverted from engineering activities to explain notes written years ago in a different environment, or to review and redraft today's notes to minimize the chance that they will be misconstrued in the future. Furthermore, effort must also be expended to

provide closure to documented issues that if left unanswered could suggest a failure to respond to knowledge of a design problem. This could later be used by a creative plaintiff's expert as support for punitive damages against a manufacturer.

Another effect of legal scrutiny of old notes is the adoption and strict enforcement in some companies of a policy to destroy records not required by law or with no demonstrated company benefit. This process not only takes time, but also requires the regeneration of data when an innovative idea that has been discarded warrants reconsideration. The additional cost or time to regenerate the information may well cause that innovation or product improvement to remain undeveloped.

Joint industry and university research has even suffered due to the present product liability environment, and shows the far-reaching effects of this phenomenon. On occasion, university employees or ex-employees have become expert witnesses for the plaintiff against a manufacturer using the knowledge and data obtained in the joint research. Subsequently, the manufacturer may be hesitant to pursue new joint research projects, knowing that the addition of an outside party to the research team may be detrimental in a product liability context.

Because of the current product liability environment, engineers are sometimes required to go to excessive lengths to ''Murphy Proof" designs.2 This reflects the assumption that engineers can anticipate and design for every possible misuse to which their products might be put. For example, one company reported that ailerons (roll control surfaces on the wings) were removed from an aircraft for maintenance and were reversed when they were reinstalled. Despite the fact that physically they were not reversible and that hinge brackets had to be deformed in order to reverse the installation, it was alleged that the design was not sufficiently "Murphy Proof."

Altering designs in response to regulatory recommendations can also be questionable. At one time the U.S. Federal Aviation Administration (FAA) published a recommended standard for locating the gear and flap controls that the pilot actuates. The location of the gear and flap controls on many of one manufacturer's aircraft that were produced prior to the recommendation did not conform. At the next change, the company revised the control locations to conform to the FAA recommendation only to have a product liability issue because the new location "confused the pilot."

The language used and amount of information given in publications such as manuals and service bulletins have been affected by the product liability environment. The "failure to warn" doctrine has resulted in a proliferation of warnings for both expected and conceivable uses or hazards. This not only consumes excessive amounts of valuable engineering time in crafting the content and language of each warning, but also generates so many warnings that they lose their impact. Also, the concern for being held accountable for encouraging possible misuse of the airplane has resulted in deleting some worthwhile information from at least one manufacturer's manuals.

Two examples of this are procedures for getting through clouds for VFR (visual flight rules)-rated pilots—those not rated for instrument flight—and soft field takeoff procedures. Instrument-rated pilots have been taught and tested to be able to control an airplane's flight path without visual reference to the ground or the horizon. VFR pilots are not licensed to fly in weather conditions that require instruments for maintaining attitude control. Some manufacturers' manuals have provided information on how to control the airplane in clouds as an aid to VFR pilots should they inadvertently be caught in clouds. Unfortunately, some lawyers have contended that such information could cause a VFR pilot to fly under conditions that, in some cases, could result in a crash. The same is argued for description of soft field landing and takeoff procedures. Thus, information that would be helpful to many pilots has been removed from the manuals.

The current product liability environment has added cost to the aircraft certification process. FAA engineers have been, and continue to be, influenced by this environment. In many cases, the certification criteria for showing compliance are now excessively conservative. This is especially true when a well-developed, rational database does not exist, and "what if" studies are required to an excess. Although undocumented, experience shows that it has become difficult to get certification approvals from FAA engineers who have been personally involved in product liability lawsuits in which a prior approval was questioned.

New regulations are being developed for questionable safety issues, those for which there is no absolute proof that a problem would ever exist, even though aircraft have been operating safely for years without allocating

engineering time to the subject or complicating the design as is now required. Examples include satisfying the new regulations for flying through lightning and high-intensity radiated fields and requiring dual load paths for mechanical controls. Not only must design engineers satisfy themselves, but tests often must be repeated for the FAA to witness. While this has always been true to some extent, the amount of repeat testing required and the need to analyze or test noncritical cases instead of relying on engineering judgment is increasing.

General aviation meets a vital need in the national transportation system of the United States and most foreign countries. However, current general aviation aircraft are becoming obsolete and are not being replaced, largely because of product liability constraints on manufacturers. The current product liability environment has caused a reluctance to include new technology in products and a diversion of financial resources from new product development. It has also added to the cost of the new product development that is being done, resulting in higher aircraft prices and reduced aircraft sales (see also Sontag, in this volume).

The general aviation aircraft engineer has been directly affected by the product liability environment in that significant amounts of time and resources that should be devoted to innovation and product improvements are being diverted to satisfy the legal requirements of product liability. As a result, a national resource—the engineering talent that should initiate manufacturing, job creation, and product export—is being wasted. The final irony is that little if any of the continuing improvement in general aviation safety can be traced to product liability litigation.