[SERI]To be safer, make carelessness too costly

Since early September, Americans have been in the grip of a food scare involving the normally innocuous spinach. It turned out that packaged California-harvested, fresh ready-to-eat spinach was contaminated with a strain of bacteria called E. coli O157:H7, leaving thus far 180 people in 25 states sick and at least one dead.
Within a few weeks, no one in this world’s most litigious society would be surprised if a barrage of lawsuits follows, seeking astronomical sums in compensation for food poisoning. Although the litigation-happy American system may seem frivolous to some, especially to food processors and restaurant operators, that is precisely what has kept food handlers extra-careful so as not to make their customers sick.
Given that Korea is still regarded by many outsiders as a third-world country when it comes to food safety, one of the best ways to get rid of this stigma is to raise the penalty (10-fold or possibly a hundred-fold) for causing food-related accidents.
For example, food-safety advocacy groups are now preparing class-action lawsuits against CJ Food, the company implicated in one of the country’s worst mass food poisoning incidents, sickening 3,000 schoolchildren last June. According to media reports, the groups are considering asking for $1,000 compensation per affected child. If the court rules in favor of the plaintiffs, the total award will be a mere $3 million, which is too small a sum to give food handlers ample incentive to prevent food-poisoning outbreaks.
This summer’s outbreak of food poisoning can be likened to other tragic incidents that plagued Korea not so many years ago, including building and bridge collapses, huge fires and explosions, and industrial and traffic accidents that have almost faded in our collective memory. If compensation is miserably low, companies would naturally reckon that it is cheaper to pay the price for injuries and casualties than to go to the extra length and expense of preventing accidents.
In the United States meanwhile, people are in general very cautious not to provide causes for accidents that can potentially hurt others. That’s not because they are born law-abiding good citizens, but rather because it is simply cheaper to be careful than otherwise.
Store owners, for example, remove any obstacles on the pavement to prevent pedestrians from tripping, because it could cost a fortune to pay for an injury on one’s property. Building owners pay attention to every safety detail in their properties to reduce fire hazards and other accident possibilities, because just one casualty caused by negligence could financially ruin them overnight.
Let’s take a case of wrongful death in Korea. If someone dies from an accident due to another’s negligence, the usual compensation paid to each victim barely goes beyond 300 million won (approximately $300,000), which is simply too low.
The compensation must be made high enough to cover the victim’s estimated lifetime earnings with interest, living expenses for the family, plus a generous punitive damage payment.
Allowing for those items listed above, the price for the loss of life will easily shoot up 10-fold or 20-fold. That will make people realize the real cost of not removing potential hazards, be it contaminants in food or other risk factors.
There may be, of course, counterarguments to this approach of relying more on the court system than government regulation. Some may point out that such large injury awards will necessarily raise prices of everything, including food, since companies will surely pass the legal costs to consumers.
But the costs may be reduced substantially once the companies carry insurance in accordance with their perceived risks. That way, well-developed insurance markets will start changing corporate behavior by charging more for careless policyholders and less for those who act responsibly.
This also will eventually lead to lower insurance premiums as more companies buy insurance policies to protect themselves from possible liability claims. Ultimately, this market-based approach will achieve the goal of reducing accidents at much less cost to the whole society. In a society with relatively weak regulatory oversight like the United States, the main instrument people use to seek relief is legal recourse. In contrast, European Union countries have stronger regulations in place, which render unnecessary elaborate product-liability and torts schemes.
In Korea, however, neither regulation nor the courts can adequately protect consumers from getting sick, maimed, or killed. It is time to seriously consider more vigorous lawsuits, in addition to seeking bigger awards for victims, as a way of reducing avoidable accidents and injuries from carelessness.

* The writer is managing editor of SERIWorld, Samsung Economic Research Institute’s English-language Web site. The views expressed in this column are the author’s and do not represent those of Samsung Economic Research Institute.

by Chung Sang-ho