Panelists Neil A. Doherty, Kenneth P. Quinn, and Bronwen Kaye

"The past terror attacks and the possibility of further such attacks puts the tort system to a serious test," remarked AEI scholar Michael S. Greve at a December 4 conference arranged by the Institute's Federalism Project. Many industries that are crucial to recovering from the attacks—industries such as insurance, pharmaceuticals, and aviation—are also the most exposed to liability in civil suits under today's laws. The panelists discussed which—if any—of these industries should receive federal aid as part of the recovery effort. Most participants agreed that at-risk industries could not withstand an onslaught of tort litigation without federal action; they considered whether targeted bailouts were enough, or whether the liability issues affecting those industries point to a larger problem with our tort system.

Robert Peck of the Association of Trial Lawyers of America disagreed with the idea that the civil liability system in its current state is harming our most important industries. September 11 is a rather unique event, he said, and there are already a number of restraints in the court system to hold back punitive damages.

Robert R. Gasaway of the law firm of Kirkland & Ellis, on the other hand, did see a need for fundamental reform. Under a traditional understanding of common law, he said, crime is the responsibility of the police to deter. For example, if a crime occurs in the hallway of an apartment building and the owner of the building has taken reasonable precautions to prevent the crime, traditional common law would rule that the crime is the responsibility of the police to deter, not the landlord. But increasingly in the United States, judges are ruling that the owner is liable for damages in such cases. This shift in blame could be devastating for businesses after a terrorist attack. Airlines, for example, might be successfully sued for not doing enough to deter terrorism.

In tort cases fifty years ago, continued Gasaway, a court in the state of either the plaintiff or the defendant ruled according to the private law of that state. If the case went to federal court, traditional common law would govern. That limited the ability of any particular jurisdiction to spread its private law to other jurisdictions. This is no longer the case. The rulings of a plaintiff-friendly state now, as a matter of course, affect the entire tort system.

Fundamental reform is necessary to reverse this course, said Gasaway, especially in the wake of September 11: "If you leave the question of liability to the judicial system without any sort of legislation reform or synthesis between private law and federal law, you're going to get some very large liability verdicts."

The insurance industry is particularly vulnerable to being hit with such verdicts, said Neil A. Doherty of the Wharton School. Lawsuits arising from the attacks could seek damages for the injuries and death of airline passengers, or injuries and death of people on the ground, or even economic destruction caused by the towers collapsing. But, said Doherty, "there's not an unlimited fund in the insurance industry from which we can simply pay these claims going forward."

Bronwen Kaye of American Home Products added that the current tort system will hamper the pharmaceutical industry's ability to respond to calls for vaccines that could combat bioterrorism. Already, vaccine makers must surmount a number of hurdles to bring their products to the market. Even with those precautions, continued Kaye, vaccines are subject to liability lawsuits.

As diseases were eliminated as a result of vaccines, some people began to focus on the side effects of vaccines rather than the benefits they provide. Real side effects from vaccines are rare, but vaccines can be blamed for a number of unrelated afflictions, especially if they occur in a time frame close to when an afflicted patient receives a vaccine. There is little appeal for pharmaceutical companies to develop and produce vaccines in the United States, and shortages of key vaccines have resulted and may well continue to result from that.

Concluded Kaye, "To be better prepared than we are today to defend ourselves against future bioterrorist attacks, we will need to give those that do the research and do the manufacturing of these vaccines special assurances that taking such a step will not jeopardize the very existence of their company."