Final answer:
The term that describes the characteristics of the justice system which increases litigation frequency and severity against companies like the Taylor Tobacco Company is a legal hazard. Legal hazards account for the risk of significant legal consequences due to the nature of a company's products, distinct from other risks such as moral hazard which involves riskier behavior when insured.
Step-by-step explanation:
The Taylor Tobacco Company is concerned about being held liable in court for damages to smokers harmed by their cigarettes, a characteristic of the justice system that leads to increased frequency and severity of this type of litigation is known as a legal hazard. This term refers to the possibility that a business is at a higher risk of litigation due to the nature of its products or services which may result in large financial penalties. Legal hazards increase the litigious challenges and potential for substantial harm or loss beyond other risks like moral hazard, particular risk, and speculative risk.
In the context of tobacco companies, past behavior of the industry as well as certain epidemiological findings have made them particularly vulnerable to legal hazards. The moral hazard problem is different, as it refers to situations where individuals or businesses may take on riskier behavior when they are insured, since the insurance covers potential losses. This is not directly related to increased litigation or legal accountability but more about behavior in the presence of insurance.