Why I do not carry any product liability insurance and why liability insurance is the major cause of the decline of the United States economy and why liability insurance should be outlawed as soon as possible (and why that will not happen any time soon).

Sounds a bit farfetched that liability insurance is the major cause of the decline of American manufacturing and the current recession. But keep reading to understand why this is so. 

Liabilty insurance is consumer fraud.
by Alf Temme

Insurance cost passed on to the consumer:
We, the public, consume products and services. The producers of products and services purchase product and service liability insurance to insure themselves against the devastating cost of potential future lawsuits. The cost of liability insurance is paid by business owners and manufacturers. Business owners do not really pay for the insurance, they just pass it right on to us, the consumers in the form of higher prices of the products and services they sell to us. We, the consumers pay for the liability insurance, but we get nothing for the extra money we pay for the insurance. We do not get an insurance policy with which we can claim for damages. So if we get injured we cannot go to the insurance company and ask for compensation. We have to find a friendly lawyer that will take our case on contingency. Contingency means that such lawyer will take a gamble and charge us nothing unless or until the insurance company that wrote the liability policy pays off on the lawsuit and at that time the lawyer will get a large percentage of the money paid off by the insurance company (usually one third) plus the lawyer fees and costs accumulated during the 2 to 3 year legal battle. Quite often the lawyer that takes the case on contingency will also get paid for the billing hours that he spent and other costs incurred in the lawsuit process. What is left for the injured party aftter all is done is less than 50% of the cost to the insurance company that also has to pay its own lawyer for billing hours.

Consumer fraud is when you pay for something and you get nothing for it in return
We, the consumers, are paying for all the liability insurance that is included as part of the price we pay for all products and services we buy, but we are not the insured or policy holders for the billions of dollars of liability insurance "we the people" pay for. We are not even the benificiaries. The manufacturers and service providers are the insured and the policy holders and the beneficiaries. They are insured against the often outrageous cost of lawsuits they must defend against and the, often even more outrageous, damage awards they are confronted with. Now, the really good thing for the insurance companies is that multiple insured will buy insurance for the identical thing they insure themselves against. The manufacturer of a product will buy insurance, the suppliers of components or subcontractors to the manufacturer will buy liability insurance, the distributor of the product will buy insurance, the retailer of the product will buy liability insurance. It is a bonanza as well for the lawyers, because often many of all these insured will get named in a lawsuit as defendants and they all need defense lawyers that all get paid by the various insurance companies that need to defend their insured party.

The insurance industry and the lawsuit industry are in a symbiotic relationship in that they would all like to increase their business to make more money.
You might think that insurance companies hate those trial lawyers that take all these lawsuits on contingency? Far from it, they love each other, even though they put up a good play in court that makes it appear as if they really do not like each other. The fact is that the higher the costs are for the insurance companies for all these liability suits the more they can ask for a hike in their insurance premium rates that they apply for with their State Insurance Commisioners. And those Commissioners also put up a good sharade to make it seem that they are protecting the public from the insurance industry. They are not, they are selling their good services to the lobbyists of the spcial interest insurance industry. This is how that is done: The insurance industry allows itself to be clobbered by the product liability trial lawyers. That makes for impressive decline in profits of maybe 5%. The insurance companies go to their State insurance commissioner and complain about their losses and that they might have to move out of State if they do not get a rate hike of at least 10% (all they need is 5% to stay even). So the insurance commissioner puts up a good fight and allows only 6% increase, that makes him look good in the public's eye, and the insurance companies get 1% more than what they really needed. Everybody is happy, except the public should not be happy at all because they are footing the bill for all this lawsuit corruption.

Mind you, all these corrupt lawyers are not bad people at all, they do everything quite legally. They break no laws while they plunder the economy at everybody's expense to enrich themselves. All of us have the same regrettable character that we do exactly that what is the best for us regardless of it being terrible for the whole economy. Specially when it is totally legal according to the laws and regulations that the lawsuit industry created for themselves with the full cooperation of all the politicians that create the laws and regulations that the lawsuit industry orders from them and pays them for through the $80 billion lobbying industry in Washington and other billion dollar lobbying industries at all levels of State, County and City governments around the Country. The Courts, lawyers as well, are also quite cooperative with the ATLA that has created all this big business for the legal defense lawyers. It is a nice and tidy business that is no different from all the other special interests. The very bad part is that this lawsuit industry dismantles so much of the American manufacturing base that we may never recover from this wrecking job of the economic infrastructure that is ongoing every day until there is nothing left of the once mighty American economy that is today already only a whimper of its former glory.   

When someone is injured or suffers loss
The injured party is never the policyholder and is not the insured or beneficiary. The only possibility to get compensated for loss or injury is to demand compensation from anyone who was involved with the manufacture, sale or distribution of a product or who sold a service. That is not an easy process and most injured parties are not capable of initiating or going through the process of getting compensated for their injury or loss they suffered. That process of asking to be compensated is most often done by a lawyer or lawfirm that can make a very healthy income from filing a lawsuit against any party that had anything to do with the manufacture or sale and distribution of the product or the service with which the injury or loss happened. These manufacturers and service providers are the policy holders and the insured for the liability insurance that insures against the cost of these lawsuits and the damage awards demanded by the injured parties.

The greatest cost to the economy from liability insurance
The cost of the insurance premiums for the liability insurance is by far not the greatest cost to the economy and all consumers. It is true that the very high costs of all this insurance is passed on to the consumer by way of higher prices for the products and services they buy and that this cost amounts to hundreds of billions per year. But the much higher cost to the economy as a whole and therefore all consumers is the trillions of dollars of damage it does every year to the American economy.

Trillions of dollars of damage to the Economy
There are at least 3 major categories of trillion dollars of damage per year to the American economy. This damage consists of: 1. The gradual and ongoing destruction of the American manufacturing base by bankrupting thousands of manufacturers with million dollar lawsuit awards. 2. The resulting increase in unemployment from manufacturers that go out of business and their subcontractors and distribution businesses. 3. The loss of hundreds of thousands better than average intelligent people to the totally unproductive legal profession, many of which could be engineeers, product developers and owners of productive businesses. America has 1.2 million lawyers whereas Japan only has 28,000 of them. All of these 1.2 million lawyers employ millions more people directly or indirectly in also unproductive jobs (secretaries, research clercks and of course courts and court employees). 4. Thousand of liability insurance employees in the unproductive insurance industry. 

Following a more detailed explanation
The biggest damage and cost to consumers
The biggest damage caused by liability insurance is the damage done to the whole economy of the United States by making the price of products and services so high that fewer and fewer consumers will be able to afford buying the products and services any longer and that results in ever more manufacturers and service providers going out of business and us buying more and more products that are manufactured in countries that do not suffer the lawsuit illness that liability insurance has created in the United States. Yes, liability insurance has created this terrible economy destroying lawsuit illness by making it extremely attractive to become a lawyer in the United States because many of these lawyers become ambulance chasers and they hire agents that give them information about injured people that is obtained (for a bonus fee) from ambulance drivers and from employees in Emergency Clinics of Hospitals. Then these lawyers contact the injured people and offer them free legal services in exchange for a hefty portion of the lawsuit awards they eventually might receive (after often 3 to 6 years of legal fighting). The legal fighting requires a lot of time and involvement for the injured consumer and often the injured consumer is persuaded by their lawyer to bend the truth when answering interrogatories and during depositions (this can also be called lying). Defense lawyers are generally not as agressive in getting their defendants to compromise the truth because they have not much to gain by that. Most parties involved in liability lawsuits have much to gain by dragging the cases out over many years of litigation. Even the insurance companies that have to pay the lawsuit verdicts and all the legal costs of lawyers on both the plaintiff and defense sides of the lawsuits have much to gain. How so? 

The huge insurance industry and the lawsuit industry are in cahoots and are in a symbiotic relationship with each other.
The more liability lawsuits are filed and the higher the lawsuit awards are that are paid by the insurance companies, the larger the liability insurance business gets and the higher the insurance premiums they will be allowed to charge as permitted by the individual States insurance commisioners. These insurance commissioners are setting the rates by the percentage of profit that insurance companies are allowed to make on the total amount of insurance premiums they sell. The more lawsuit costs the insurance companies have the higher insurance rates they can apply for with the insurance commissioners. Whenever they apply for higher insurance rates with the individual State insurance commissioners, these insurance commissioners put up a mock fight of charades that are supposed to convince all consumers that the State government is really taking good care of us by defending the interests of the consumer and not supporting the special interests of the insurance and lawsuit industries. Meanwhile the lobbyists for the insurance and lawsuit industries are stuffing the pockets of legislators and insurance commissioners that are the players in the mock fight charades. And the final outcome of those fights is that the insurance industy gets permission to raise their rates. Often the insurance industry will ask for excessive rate hikes that are not warranted and that give insurance commissioners opportunities to look good by denying them the rate hikes and delivering evidence that they have the best interest of the public at heart, which of course is not the case at all. We will most often see that insurance commissioners will receive generous election campaign contributions from the insurance industry to run for higher office where they can make laws and regulations that benefit the insurance and lawsuit industry even more. 

No freedom of choice
Since liability insurance costs are passed on to us, the consumers in the price of products and services, the consumer has no freedom of choice whether to buy or not to buy liability insurance that covers the cost of lawsuits to manufacturers and service providers. It is included in the price of the product and is not offered as an optional choice such as the optional extra insurance that is offered to consumers when renting a car.

Liability insurance does not cover consumers
When anyone gets injured or suffers loss from a product or service such person is not the insured. Such injured person must seek compensation from a manufacturer or service provider and must find a lawyer who will file a lawsuit on contingency. When the compensation that can be expected is under $5,000 then finding a lawyer who will take the case on contingency is not very likely. If the loss or injury was not very interesting and cannot get a jury to be sympathetic with the plaintiff then no lawyer will take the case on contingency. If the manufacturer or service provider of the product or service is no longer in business, then there is nobody that can be sued and the loss that was suffered by the consumer will not be compensated. This means that all the liability insurance costs that were paid by all consumers do not give any coverage to consumers at all and therefor are a big ripoff, scam and fraud. The only thing that liability insurance provides are more attractive conditions for lawyers to file lawsuits and to take cases on contingency, deep pockets. That fraud has to stop and the only way to stop it is by outlawing liability insurance. But what to put in the place of this liability insurance to cover injuries and losses that consumers suffer? 

Optional insurance offered during purchase
When renting a car consumers are given an option of purchasing additional insurance coverage or declining it. When opting for purchasing such additional insurance coverage, the consumer signs for it and becomes the insured and gets a copy of the contract that is proof of the consumer being the insured. When a person, that has signed for such additional insurance for a car rental, suffers a loss, there is immediate coverage paid for by the insurance company.

Liability insurance is a very costly ripoff to us, the consumers
The cost of the existence of liability insurance to the economy as a whole is enormous and apparently beyond comprehension for the average voter and their representatives in government which do not represent the interests of the consumers at all (they represent the interests of the special interest groups that pay them bribes through the 80 billion dollar per year lobbying industry).  In this case of liability insurance two special interest groups in particular will fight as hard as they can to keep liability insurance in existence because without liability insurance both the insurance industry and the ATLA (American Trial Lawyers Association) would see their net profits dropping sharply. These two special interest groups, the INSURANCE INDUSTRY and the LAWSUIT INDUSTRY are in a symbiotic relationship that is tremendously profitable to them and very destructive and very damaging to the whole American Economy and to millions of Americans.  Outlawing liability insurance and replacing it with another form of more cost-effective and less destructive form of insurance will strengthen the economy as a whole enormously and it will improve the standard of living for all Americans.

What is the large damage that liability insurance does to the economy?
The enormous damage done by liability insurance to the economy is most likely the main reason for the gradual and steady economic decline of the United States.

Liability insurance must be outlawed
Because it is fraud and corruption of a high order, liability insurance must be totally outlawed while insurance policies against loss and injury could be offered as an option to consumers when buying products and services similar to the extra insurance coverage that is offered when renting a car. How practical is it to buy extra insurance whenever buying a product or service? Totally impractical but it would not be consumer fraud and it would provide freedom of choice. But the real benefit of outlawing liability insurance is that no cost of liability insurance is any longer included in the price of products and services and that this represents hundreds or thousands of dollars less spent on the cost of goods and services and that in turn represents hundreds or thousands of dollars saved for each consumer. That now is the real solution to consumers to be covered by insurance for any and every loss or injury they may need compensation for because they can buy a very good yearly blanket insurance policy from part of the money they save from not having to pay for liability insurance that is currently part of the cost of products and services they buy (we all buy).
The following is still subject to editing and improvement:

Not a well-known "expert"
I, Alf Temme, am not a senior fellow at the Manhattan Institute or a distinguished member of one of the big political thinktanks. I am a lowly manufacturer of products (prebuilt sauna rooms and a 4 minute per day exercise machine)  and I am the only member of www.OneManThinktank.com a thinktank that has a membership of only one person, me. 

Lawsuit madness
We, the general public, are paying for all the lawsuit madness in America. We pay for it by having our economy trashed through killing thousands of small and large manufacturers through these very expensive lawsuits that increase the cost of liability insurance premiums to where they cannot afford to stay in business and that cripples our economy and moves it into recession. We pay for it in higher prices and in the insurance we buy (car insurance for example). This lawsuit madness is suing large and small businesses out of existence and it is a major factor in the decline of American manufacturing jobs and it is exporting these American manufacturing jobs to China and other developing countries.

"We, the people" pay for all this mostly nonsense
How do you and I pay for all these lawsuits and for the majority of the high incomes of the million strong army of lawyers in the USA plus a large percentage of the profits of all insurance companies? Manufacturers and all other businesses buy liability insurance to try to protect themselves from the lawsuit disease. But these businesses pass all that insurance cost and other liability related costs on to the consumer by adding these costs as part of the cost of doing business embedded in the products and services they sell. 

The cost of all these lawsuits
So the total cost of lawsuits and insurance are passed on to, you guessed it, us the consuming public. The cost of liability insurance is embedded in the price we pay for food, goods and services. The sellers and manufacturers of food, goods and the providers of services all buy liability insurance that fund all these lawsuits and lawsuit awards. They also pay for lawyer wages and insurance company overhead and insurance company profit. So you might think that this does not affect you, so why should you be bothered by all this? Think again, you and I pay for all that insurance because all these businesses pass the cost for insurance on to us, the consumers, by including the insurance cost in the price of their products and services.

We, the consumers pay for all this insuranceThis means that you and I and all the general public pay for all the insurance. The manufacturers, retailers and service providers do not pay for the insurance, they just pass the insurance cost on to us, the consumers.  Amazing that the government allows the passing on of the insurance to the consumer without the consumer having a choice whether the consumer wants to buy the insurance or would like to decline the insurance. The consumers do not even get an insurance policy issued in their name for the insurance money they paid. We, the consumers, get nothing. That is consumer fraud and it should be brought to the attention of the Consumer Protection Agency. 

So how is this liability insurance CONSUMER FRAUD?
It is consumer fraud because we the consumers pay for all the insurance but we are not the policy holder of the insurance that we have paid for. In other words, when we are paying for a product or a service that has the price of insurance included in the price we pay, we do not get an insurance policy with it. So if or when we get injured with a product or a service for which we have paid the insurance we have no insurance policy with which we can go to the insurance company and make an insurance claim.

If we were to get injured we need to find a lawyer who will represent us for free in exchange for a hefty percentage of the lawsuit award. If the expected damage that we are claiming is under $25,000 we will likely not find such a friendly lawyer because there is not enough in it for them to compensate them for their legal services. These lawyers would rather find some juicy cases by  If the manufacturer or the business that paid for the liability insurance that was part of the product or service we purchased is out of business by the time we got injured, then we are totally out of luck, because there is no lawyer that could find a target for their lawsuit and there is no insurance company that they could go after for compensation. So we paid for the insurance that was embedded in the price of the product or the service we purchased, we did not get an insurance policy and we were defrauded because we got nothing in return for the insurance money we paid inside the purchase price of the product or service we purchased. That is one of the most pure and sneakiest forms of consumer fraud and as such should be brought to the attention of the FTC Consumer Protection Agency. Not much hope for the FTC to lift a finger to do anything to protect the general public from being defrauded in this corrupt manner. The reason is that the two huge special interest, the insurance industy and the ATLA (American Trial Lawyers Association)would lose a lot of their fraudulent gains if this liability insurance were to disappear so they will spend a lot of money on lobbyists that will block any measure that would outlaw liability insurance.

 
Legislation that would make liability insurance illegal
Not only should this insurance corruption be brought to the attention of the authorities, there should be legislation introduced that would make it illegal to embed the cost for liability insurance in the price of a product or a service. So I have the idea that we could create legislation that would free us from this liability insurance corruption scam. My proposal is for legislating a LIFA-act.  The Liability Insurance Freedom Act (LIFA) that would require that no form of insurance can be embedded in the price of a product or a service and that such insurance can be purchased separately at the time of purchase of the product or service similar to the extra insurance coverage that is offered separately when renting a rental car. You can either buy it or decline it. And if you buy the extra insurance you get a copy of the insurance policy right then and there and you are the insured and the policy holder.

This LIFA law would require a companion law that would make it unlawful to sue anyone in relation to a product or service failure or accident. That law could be called the People's Lawsuit Freedom Act (PLFA).

Trial lawyers will fight hard to keep the liability insurance fraud and corruption going as long as possible.
Trial lawyers will argue that they are the only ones that with all their lawsuits are protecting the public from unscrupulous manufacturers and service providers that knowingly deliver shoddy products and services and only have profit in mind and care nothing for the safety and wellbeing of the consuming public. They argue that these nasty capitalist criminal manufacturers need to be taught a lesson that will be very expensive so that they will now be forced to improve their defective products and services and not knowingly and wantonly subject the consumer to dangerous products and services any longer. These lawyers argue that they have improved the quality of products and reduced the accident rate. This sounds logical and that is why the public is buying those lies. The fact is that products in foreign countries are constantly and faster improving than in the United States without the manufacturing sector in those countries being sued out of business. For manufacturers and service providers it is true that most of them knowingly manufacture products and provide services that are less safe than they could be. Considerations of price and utility are a factor in the decision making process of creating safer products or products that are extremely safe but have less or no utility because of the greater safety measures employed, in other words they have been made safer but less useable or have been made unuseable by the additional safety measures that have been added. Then the question must be considered how the addition of safety affects the utility and how much safety was increased and how much utility was lost. 
 
Some examples:
In 2002 in the USA car accidents killed  42,643 people and injured 2.9 million people. Cars will be safer and fewer car accidents will happen if the top speed of cars is reduced to 5 miles per hour or if mattresses were to be mounted all around the car. Maybe it will reduce car accident deaths by as much as 99% and only 42 people would get killed instead of 42,643 and only 29,000 people would get injured instead of 2.9 million. But now the utility of 5mph cars is near to nothing and still 42 people get killed so that calls for additional safety measures such as reducing the speed limit to 1 mph. That will reduce car accidents by maybe by 99.9% and make cars almost completely safe because nobody will drive cars any longer because they have no utility at all any longer. Of course you will say that reducing the speed limit to 5 mph or 1 mph is totally rediculous and that there is an optimum speed where the trade-off between greater safety and the reduction in utility is the best compromise and that it would be the ideal increase in safety. That is exacly the point. Safety can only be increased to a certain point and at such point there is still danger left and injury will still happen and lawsuits will still be filed and manufacturers will still be sued out of business.   

Kitchen knives are the single biggest cause of home accidents and there is very little that can be done to make kitchen knives safer without making them almost useless. Shielding the sharp edge of knives with retractable guards would make the knives useless. I do not know of lawsuits that have been filed against manufacturers of knives for insufficient guarding of the sharp edges of knives. Thousands (about 30,000 per year) of fingers get amputated by doors slamming shut onto fingers. Toddlers are the main victims.
 

Going after all manufacturers and service providers with lawsuits to try to improve the safety of products and services is the wrong approach and totally counter productive. Fact is that in countries without this idiotic lawsuit disease of ours in the USA, manufacturers have constantly improved their products and have created lots of innovation (Japan, Germany) whereas manufacturers in the USA have been reluctant to innovate or upgrade their products for fear of lawyers finding new reasons to sue them out of business.

Any comments to this author: alf@400a.com