Ohio Enacts Broad Tort Reform for Products Liability Claims

April 2005
Drug & Medical Device Newsletter, Spring 2005

On April 7, 2005, Amended Substitute Senate Bill 80 (“Senate Bill 80”) became effective in Ohio.  Senate Bill 80 is Ohio’s third attempt in the past decade to enact broad reforms to Ohio’s personal injury lawsuit system.  Senate Bill 80 applies, in general, to tort actions, including product liability claims.  This article focuses on the changes that Senate Bill 80 makes to products liability law in Ohio and the benefits these changes provide to defendants sued for products liability claims.

SENATE BILL 80’S CHANGES TO PRODUCTS LIABILITY LAW

Abrogation Of Common Law Products Liability Causes Of Action

Senate Bill 80 abrogates all Ohio common law products liability causes of action.  In 1997, after the General Assembly enacted the Ohio Product Liability Act (“OPLA”), the Ohio Supreme Court held that since the OPLA did not specifically state that it was intended to abrogate common law products liability claims for negligent design, then the common law product liability cause of action for negligent design survived the enactment of the OPLA.1  From this decision, the question arose whether, given a particular situation and claim, Ohio common law or the OPLA controlled the legal issues of the cause of action.  The fallout from this decision was much confusion and inconsistency among the appellate courts deciding substantive legal issues in products liability claims.

In order to supersede the Supreme Court’s decision in Carrel, O.R.C. § 2307.71(B), as revised by Senate Bill 80, states “Sections 2307.71 to 2307.80 of the Revised Code are intended to abrogate all common law product liability causes of action.”  Further, in enacting Senate Bill 80, it was the findings and intent of the Ohio General Assembly “that the amendment made by this act to section 2307.71 of the Revised Code is intended to supersede the holding of the Ohio Supreme Court in Carrel v. Allied Products Liability Corp. (1997), 78 Ohio St.3d 284, that the common law product liability cause of action of negligent design survives the enactment of the Ohio Product Liability Act, section 2307.71 to 2307.80 of the Revised Code, and to abrogate all common law product liability causes of action.”2  Therefore, for products liability causes of action filed after April 6, 2005, the OPLA will govern them and any Ohio common law products liability causes of action will cease to exist.

Defective Design or Formulation Claims

In addition to providing that the OPLA controls products liability causes of actions, Senate Bill 80 also makes a number of changes to the OPLA. 
Senate Bill 80 changes the standard for when a product is defective in design or formulation.  Under existing Ohio law, a product is defective in design or formulation if either: (1) when it left the control of its manufacturer, the foreseeable risks associated with its design or formulation exceeded the benefits; or (2) it was more dangerous than an ordinary consumer would expect when used in an intended or reasonably foreseeable manner.

Senate Bill 80 removes the consumer expectations test, such that a product is only defective in design or formulation if, at the time the product left the control of its manufacturer, the foreseeable risks associated with its design or formulation exceeded the benefits.  In order to determine whether the foreseeable risks associated with a product’s design or formulation exceed the benefits, Senate Bill 80 sets forth a list of factors to consider, (which includes consumer expectations):  (1) the nature and magnitude of the risks of harm associated with that design or formulation in light of the intended and reasonably foreseeable uses, modifications, or alterations of the product; (2) the likely awareness of product users, whether based on warnings, general knowledge, or otherwise, of those risks of harm; (3) the likelihood that that design or formulation would cause harm in light of the intended and reasonably foreseeable uses, modifications, or alterations of the product; (4) the extent to which that design or formulation conformed to any applicable public or private product standard that was in effect when the product left the control of its manufacturer; and (5) the extent to which that design or formulation is more dangerous than a reasonably prudent consumer would expect when used in an intended or reasonably foreseeable manner.3


Contributory Fault and Assumption of the Risk

Senate Bill 80 removes the previous limitation that Ohio’s contributory fault rule does not apply to products liability causes of action.4  Now, under Senate Bill 80, a products liability cause of action is subject to the contributory fault rule, unless it is an intentional tort claim.  Further, Senate Bill 80 provides that a defendant in a products liability case may assert express or implied assumption of the risk as an affirmative defense, and if it is found that the express or implied assumption of the risk is a direct and proximate cause of the harm for which the plaintiff seeks recovery, then the express or implied assumption of the risk is a complete bar to the recovery of those damages.5

Senate Bill 80 also provides that if implied assumption of the risk is asserted as an affirmative defense to a products liability cause of action which alleges that a supplier’s negligence proximately caused harm to the plaintiff, then the contributory fault rule is applicable.  In such a case, a jury must determine if the contributory fault of the plaintiff is greater than the combined contributory fault of the defendants, in which case the plaintiff would be barred from recovery.  If the jury finds that the contributory fault of the plaintiff is less than the combined contributory fault of the defendants, then the plaintiff’s recovery is diminished by an amount that is proportionately equal to the percentage of the contributory fault attributed to the plaintiff.6
 
Safe Harbor from Punitive Damages for Medical Devices, Over-The-Counter Drugs and Other Products


Senate Bill 80 adds medical devices approved and licensed by the FDA to the safe harbor provision for punitive damages that was previously extended to medical drugs approved and licensed by the FDA.  Under existing Ohio law, manufacturers of drugs are not liable for punitive damages if the drug was manufactured and labeled in accordance with the terms of an approval or license issued by the FDA, unless it can be shown that the manufacturer fraudulently withheld from the FDA material information relevant to the harm that the plaintiff allegedly suffered.  This is known as the “fraud on the FDA” exception.  Senate Bill 80 adds manufacturers of “devices” to this punitive damage safe harbor.  Now manufacturers of devices are also not liable for punitive damages if the same test is met.7

In addition, Senate Bill 80 provides this same protection to manufacturers of over-the-counter drugs, such that manufacturers of over-the-counter drugs are not liable for punitive damages if the over-the-counter drug was marketed pursuant to federal regulations, was generally recognized as safe and effective and as not being misbranded, and satisfied each of the conditions contained in the applicable regulations and monograph required by the FDA.  The protection afforded to manufacturers of over-the-counter drugs is also subject to the same “fraud on the FDA” exception.8

Whereas the OPLA had only provided safe harbor from punitive damages for drugs, Senate Bill 80 now extends this protection for products other than medical drugs or devices.  Senate Bill 80 provides that manufacturers and/or suppliers of products other than medical drugs or devices are not liable for punitive damages if the manufacturer and/or supplier fully complied with all applicable government safety and performance standards when the product left the control of the manufacturer and/or supplier.  The safe harbor for products other than medical drugs or devices is subject to a similar fraud on the government agency exception.9


LIMITATIONS ON DAMAGE AWARDS FOR PRODUCTS LIABILITY CLAIMS

Senate Bill 80 limits damages for tort actions, including products liability causes of action.  Damage limitations are placed on noneconomic damages in “non-catastrophic” tort actions and punitive damages for tort actions generally. 

Noneconomic Damages

Noneconomic damages include pain and suffering, emotional distress, and loss of companionship.  For “non-catastrophic” tort actions, defined as all tort actions not involving permanent injuries, physical deformities, wrongful death, etc., noneconomic damages are limited to the greater of $250,000 or 3 times the plaintiff’s economic loss, up to a maximum of $350,000 for each plaintiff or $500,000 for each occurrence.10

While there are no caps on noneconomic damages in “catastrophic” tort actions (i.e., tort actions involving permanent injuries, physical deformities, wrongful death, etc.), Senate Bill 80 enacts a judicial procedure by which noneconomic damage awards in such cases can be reviewed.  Upon a post-judgment motion, a trial court must review the evidence supporting an award of compensatory damages for noneconomic loss that the defendant has challenged as excessive.  The trial court shall consider, without limitation, whether evidence and arguments inflamed the passion or prejudice of the jury, resulted in the improper consideration of the wealth of the defendant, resulted in the improper consideration of the misconduct of the defendant so as to punish the defendant improperly, whether the verdict is in excess of verdicts involving comparable injuries, and whether there were any other extraordinary circumstances that resulted in excessive noneconomic damages.  If the trial court upholds the noneconomic damage award, it must set forth in writing its reasons for upholding the award.11


Punitive Damages

If punitive damages are allowed in a products liability cause of action, Senate Bill 80 limits the amount of punitive damages that can be awarded to 2 times the amount of compensatory damages.   However, small employers and individuals are subject to even lower punitive damage limitations.  Small employers are those who employ not more than 100 persons on a full-time permanent basis, or for certain manufacturing employers, those who employ not more than 500 persons on a full-time permanent basis.  For small employers and individuals, punitive damages are limited under Senate Bill 80 to the lesser of 2 times the amount of compensatory damages or 10 percent of an employer’s or individual’s net worth when the tort was committed, up to a maximum of $350,000.13

Additionally under Senate Bill 80, punitive damages cannot be awarded against a defendant that files with the court evidence showing that: (1) punitive damages have already been awarded and collected against the defendant based on the same act or course of conduct, and (2) the aggregate of the previous punitive damages award(s) exceeds the maximum applicable punitive damage limitations under Senate Bill 80.14  This exception for punitive damage awards previously paid and collected does not apply (i.e., there is no punitive damage limitation) if the court determines the plaintiff will offer new and substantial evidence of previously undiscovered and additional behavior warranting punitive damages, other than that which caused the injury or loss suffered by the plaintiff, or if the court determines that the total amount of prior punitive damage awards was insufficient to punish the defendant’s behavior and to deter the defendant from similar behavior in the future.15

By placing these limitations on the amount of punitive damages that may be awarded, it was the intent of the General Assembly to have Ohio’s punitive damages law comply with the holding of State Farm Mutual Insurance Company v. Campbell,16 which held that courts must consider certain factors in order to determine if a punitive damage award is considered excessive and unconstitutional.17  As set forth in State Farm, the factors a court must consider are:  (1) the degree of reprehensibility of the defendant’s misconduct, (2) the disparity between the actual or potential harm suffered by the plaintiff and the punitive damage award, and (3) the difference between the punitive damages awarded by the jury and the civil penalties authorized or imposed in comparable cases.18  The United States Supreme Court further stated that (1) punitive damages should be awarded only if the defendant’s conduct is of such a reprehensible nature that it warrants the imposition of further sanctions to punish or deter the defendant, (2) a state does not have a legitimate concern for imposing punitive damages to punish a defendant for unlawful acts and conduct committed outside of the state’s jurisdiction, (3) punitive damages should only be awarded for conduct directed towards the plaintiff, and (4) punitive damage awards exceeding a single-digit ratio between the punitive and compensatory damages (i.e., 9 to 1) will rarely satisfy due process.19

Finally with regard to the punitive damage limitations enacted by Senate Bill 80, they do not apply to tort actions resulting from defendants who: (1) act with one or more of the culpable mental states of purposely and knowingly, and (2) have been convicted of or plead guilty to a felony that is the basis of the tort action and the felony had as an element of the offense a mental state of purposely and knowingly.20


MISCELLANEOUS EVIDENTIARY AND OTHER TRIAL PROCEDURES

Senate Bill 80 enacts several rules that provide protection and benefits to defendants in products liability cases during the trial stage of litigation.

Bifurcation of Trial

Senate Bill 80 enacts a mandatory separation of the compensatory and punitive damage phases of a jury trial.  Upon the motion of any party in a tort action, a trial involving claims for compensatory and punitive damages must be bifurcated.  During the initial compensatory damage phase of the trial, the court shall not permit evidence that relates solely to the claim for punitive damages.  If the jury determines that the plaintiff is entitled to recover compensatory damages, a second phase of the trial will be held to determine whether the plaintiff is entitled to recover punitive damages.  This will ensure that information which the jury should not consider when awarding punitive damages is not put before the jury during the compensatory damages phase of the trial.21

Jury Awareness of Taxation of Awards and Limitations on Damages

Senate Bill 80 requires courts to instruct the jury regarding the extent to which an award of compensatory or punitive damages is taxable under federal or state income tax laws.22

Further, the court must ensure that at no point during the trial or jury deliberation process is the jury informed of or instructed on any limitations placed on noneconomic or punitive damages.23


Collateral Source Rule

Senate Bill 80 modifies Ohio’s collateral source rule.  Under Senate Bill 80, the defendants in tort actions can introduce evidence of any amount payable as a benefit to the plaintiff, unless: (1) the source of the benefit has a mandatory self-effectuating federal right of subrogation, (2) a contractual right of subrogation, (3) a statutory right of subrogation, (4) the source pays the plaintiff a benefit in the form of a life insurance payment, or (5) the source pays the plaintiff a benefit in the form of a disability payment.  If a defendant introduces admissible collateral benefit evidence, the plaintiff may introduce evidence of any amount that the plaintiff has paid or contributed to secure the right to receive the collateral benefit.24


CONCLUSION


Senate Bill 80 drastically changes Ohio law governing products liability claims, as well as tort actions generally.  It abrogates Ohio products liability common law and finally clarifies that the OPLA is the controlling law in Ohio for products liability causes of action.  Further, it changes the standard used to determine if a product is defective and provides an assumption of the risk defense to products liability claims.  It provides greater protection from punitive damages to more types of products, and it limits both noneconomic and punitive damages that may be awarded.  Additionally, it provides defendants benefits in the trial stage of litigation.  In sum, Senate Bill 80 will provide added protection to defendants sued in products liability cases both in risk of liability of the defendant and the amount of damages awardable to the plaintiff.


[1] Carrel v. Allied Products Liability Corp., 78 Ohio St.3d 284, syllabus paragraph 1 (1997).
[2] Am. Sub. S.B. No. 80, Section 3(D).
[3] Am. Sub. S.B. No. 80, § 2307.75(B).
[4] Am. Sub. S.B. No. 80, §2315.32.
[5] Am. Sub. S.B. No. 80, §2307.711(B) (2).
[6] Am. Sub. S.B. No. 80, §2307.711(B) (3).
[7] Am. Sub. S.B. No. 80, §2307.80(C).
[8] Am. Sub. S.B. No. 80, §2307.80(C).
[9 Am. Sub. S.B. No. 80, §2307.80(D).
[10] Am. Sub. S.B. No. 80, §2315.18(B) (2).
[11] Am. Sub. S.B. No. 80, §2315.19(A).
[12] Am. Sub. S.B. No. 80, §2315.21(D) (2) (a).
[13] Am. Sub. S.B. No. 80, §2315.21(D) (2) (b).
[14] Am. Sub. S.B. No. 80, §2315.21(D) (5) (a).
[15] Am. Sub. S.B. No. 80, §2315.21(D) (5) (b).
[16] 123 S. Ct. 1513 (2003).
[17] Am. Sub. S.B. No. 80, Section 3(A) (4) (c).
[18] State Farm Mutual Insurance Company v. Campbell (2003), 123 S. Ct. 1513.
[19] Id.
[20] Am. Sub. S.B. No. 80, §2315.21(D) (6).
[21] Am. Sub. S.B. No. 80, §2315.21(B).
[22] Am. Sub. S.B. No. 80, §2315.01(B).
[23] Am. Sub. S.B. No. 80, §2315.18(F).
[24] Am. Sub. S.B. No. 80, §2315.20.

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