Taylor Tobacco Company is concerned that the company may be held liable in a court of law and ordered to pay a large damage award to a smoker harmed by the company's cigarettes. The characteristics of the judicial system that increase the frequency and severity of loss are known as

Legal hazard

Explanation:

Legal hazard -

It refers to any harm, according to the legal procedure, is referred to as legal hazard.

Any activity which might contempt the legal rights of the person or law, comes under legal hazard.

Legal hazard can also be done by any company or business, like insurance companies, like including alcoholism in health insurance.

Hence, from the given scenario of the question,

The correct answer is legal hazard.