Resolving the crisis in the products liability insurance market requires fundamental reform in judicial and legislative thinking about the purpose of the tort system.
Problems in insurance markets tend to reflect underlying problems in the industry, product, or activity insured. While insurance and interest rate cycles, and patterns of state regulation and taxation, affect the insurance market, to a significant extent a rapid rise in auto insurance rates reflects increased car thefts and other risks; climbing health insurance costs indicate increased use and cost of hospital and physician services, and so on.
The solution to the liability insurance crisis lies more in the tort system than the insurance system, although intelligent regulatory policy vis a vis the industry and a positive swing in the insurance cycle can buy time for a more permanent solution.
Seeking that solution, over forty states have passed some type of tort reform in the past three years. The reforms tend to focus on damage caps and, in some instances, joint and several liability. These reforms are generally helpful, but fail to attack the core problems of the destruction of traditional notions of causation and contract.