If vendors, authors and testers are made liable for the bugs in their software, contributors to freeware and people who make free contributions to open source will find themselves liable for lines of code and algorithms that they gave away for free, and for testing they did on charitable basis.

I'd expect non-employee authors, testers and project managers would be jointly and severally liable, meaning that basically all the authors, testers and project managers would be responsible for the final product. A user would be entitled to bankrupt each contributor to the product until sufficient funds were acquired to cover his loss due to the vulnerability. (Employees are generally protected from liability for work they do for their employer by the employer. The employer assumes responsibility and liability for their work, and arranges insurance for themselves.)

On a second note, to AJ, the infallibility of open source is just a myth the newbies and hobbiests spout. Lots of open source products have vulnerabilities.