Product Liability

Companies that manufacture or distribute products in the United States must be conscious of product liability law and its consequences.

 

Product liability is the area of law in which manufacturers, distributors, suppliers, wholesalers, retailers, and others who make products available to the public are held responsible for the injuries caused by those products. Product liability claims impose strict liability on the responsible parties. Under strict liability doctrine, a merchant is liable if the product is defective, even if the merchant was not negligent in making or providing that product to the customer. Instead of targeting a merchant’s misbehavior, strict liability claims focus on the product itself. In strict liability terms, when it is shown that the product is defective, a merchant is liable. It doesn’t matter whether the manufacturer or supplier followed the strictest precautions.

 

A merchant is anyone who deals with certain products on regular basis. Under the law, not only are manufacturers liable for the defective products, but so are all parties involved in the regular chain of distribution (suppliers, wholesalers, retailers, commercial lessors, etc.).  A casual seller, such as someone making random personal sales or selling items on eBay is not a merchant. A service provider is not a merchant as well. Thus, a doctor cannot be held responsible for the broken chair in his office under the product liability doctrine since a doctor is not a merchant of the chairs; rather, the doctor uses them as collateral instruments to his or her services. Commercial lessors, on the other hand, who deal with particular products regularly and when those products constitute the primarily part of their business, are considered to be merchants. A car rental company can be held liable under the product liability theory for the broken cars since dealing with the cars is its primary business and, accordingly, it may be held responsible for the conditions of the provided cars.

 

Strict liability extends to all parties involved in making a defective product available to the public; i.e. to every person in the distribution chain, not only to the one who deals directly with a prospective plaintiff. A manufacture, wholesaler, retailer, and all other market participants can be sued for the dysfunctional product, depending on their involvement in the distribution of that product. Moreover, such defendants may be liable not only to direct customers and users, but also to any innocent bystanders randomly injured by the defective products.

 

A product liability claim is a civil lawsuit brought against the maker or distributor of a product, alleging that a person or group of people were injured or damaged by a product that was defective or not suitable for its intended use.

 

A landmark case in product liability law is Escola v. Coca-Cola Bottling Company, 24 Cal. 2d 453 (1944), which states: “There is no negligence, however, public policy demands that responsibility be fixed wherever it will most effectively reduce the hazards to life and health inherent in defective products that reach the market. It is evident that the manufacturer can anticipate some hazards and guard against the recurrence of others, as the public cannot… It is to the public interest to discourage the marketing of products having defects that are a menace to the public. If they do reach the market, however, it is to the public interest to place the responsibility for whatever injury they may cause upon the manufacturer, who, even if he is not negligent in the manufacture of the product, is responsible for its reaching the market.”

 

Claims for injuries caused by consumer products can be based on several theories:

 

  • Manufacturing defect;
  • Design defect;
  • Inadequate warning;
  • Battery (a device was intentionally broken; and
  • Other theories, depending on what caused the injury.

 

To win a lawsuit, a plaintiff must demonstrate all four elements applicable to the strict liability in consumer products cases:

 

1)      Defendant must be a merchant who routinely deals with the kinds of goods that are at issue (not a casual or accidental seller).

2)      Evidence that a product is defective. There are three kinds of defects:

 

a)      Manufacturing Defect: If a product differs from all other products that came from the same assembly line, making it more dangerous than a consumer would expect;

b)      Design Defect: If a product has a design defect if there exists a safer, more practical and cost-effective way to build it, but the merchant has chosen not to implement it for some reason; and

c)      Informational Defect (also known as Defect in Marketing): Exists when using a product involves some risk that cannot be avoided, and a consumer was not given adequate warning regarding that risk. If it is possible to make a product safer, a merchant cannot escape liability even when it gives extensive warnings.

 

3)      A product has not been altered since it left defendant’s possession. If a product is moved through the ordinary chain of distribution (manufacturer to wholesaler to retailer to customer), it is assumed that it was not altered, and it is up to the defendant to prove otherwise. This presumption is not applicable to the sale of used goods. 

4)      A plaintiff must use a product in a foreseeable way. A foreseeable use is not limited to the one intended by a manufacturer or a seller. Many misuses are foreseeable, even if they may not be ordinary. For example, people often stand on a chair to change a light bulb; accordingly, it is foreseeable that a chair is not used for sitting only.

 

Defenses

 

Plaintiff’s comparative fault, gross negligence in using the product or an abnormal unpredictable use, is an affirmative defense in the cases of strict product liability. Other common defenses are:

 

State-of-the-Art Defense: At the time the product was manufactured or sold, there was no other practical or reasonable alternative design for the product that would have made it less dangerous and still useful for its purpose.

 

Assumption of Risk: An ordinary person using the product would know it was dangerous and would exercise care in using the product. If he or she did not, he or she thereby agreed to the inherent risk.

 

Adequate Warnings: Although the product was dangerous, adequate warnings or instructions were included with the product.

 

Altering or Misusing the Product: The injury resulted from the user altering or misusing the product, unless the misuse could be reasonably foreseen by the manufacturer.

 

Superseding Cause: A safe product was made unsafe by the occurrence of a superseding event such as a criminal or third party act, etc.

 

Statute of Limitation: The general time period for filing products liability lawsuits for personal injuries is two years. For property damages caused by a defective product, it is three years. This time period begins to run on the date of the injury.

 

A defendant in a product liability action may be able to raise other traditional defenses available in tort cases as well as certain defenses unique to specific product liability actions. The availability of these defenses will vary from state to state.

 

Damages

 

There are three general types of damages that may be claimed by a plaintiff in a product liability action: nominal, compensatory, and punitive or exemplary damages.

 

Although the principal objective of granting damages is compensation for the suffered injuries, in some situations, nominal damages (a trivial sum) may be recovered where a cause of action is proven but no substantial damages are shown. There are two advantages of such an award to a plaintiff: (1) The plaintiff is entitled to costs of a lawsuit; and (2) he or she may be entitled to punitive damages. It is a fundamental principle that a negligent act does not give rise to liability without incurred damages. Hence, where no actual injury has occurred, even nominal damages are not recoverable.

 

Compensatory damages are designed to actually compensate a plaintiff for the sustained injuries. Recoverable damages include medical bills, economic value of lost earnings over expected lifetime, pain and suffering, a spouse’s derivative claim for loss of consortium, and, in some states, other family members’ derivative claims for loss of companionship.

 

In addition to the above damages, punitive damages may be granted if the defendant’s conduct has been grossly negligent or outrageous, for the purpose of punishing him or her and deterring the defendant and other market participants from such conduct in the future. Punitive damages may be awarded even though there is no substantial pecuniary or physical harm. A cause of action must be shown in any case, but an award of nominal damages is enough to support further award of punitive damages.

 

The dramatic increase in the production of varied innovative goods and international trade has led to the constant supply of new or amended products to the U.S. market. The downside is that distributors are increasingly being brought into U.S. courts on allegations of product defects resulting in injuries to American consumers. Merchants should be aware of all laws and regulations applicable to their products so as to prevent any possible violations of law and to be able to react knowledgeably and decisively if called as a party into any legal action.

 

How to Manage Product Liability Risks

 

Companies cannot prevent people from bringing lawsuits against them, but they can improve their chances for a successful defense and expeditious trial by taking certain legal and practical steps.

 

First, it is important to work on the development of the comprehensive product warnings. The products sold to the general public should incorporate all necessary warnings applicable to both the direct and indirect (foreseeable) use of those products. Extensive warnings help to minimize product liability claims.

 

Second, merchants should ensure the product includes safety measures such as safety instructions, if applicable. For example, products that are dangerous when left unpacked or connected to an electrical outlet should either contain some safety features to prevent injury to users or at least safety instructions, if safety features are not possible or practicable to install. Product safety instructions should be clear, straightforward, and understandable to an average user. If instructions are ambiguous and could be misinterpreted by a layperson, the merchant will be held responsible for any damages or injury that result.

 

Taking sufficient precautions, following standard procedures in manufacturing and distribution of the products, maintaining strict compliance with U.S. governmental norms and regulations, and carrying adequate business insurance are all important parts of business risk management. All possible risks should be carefully considered and evaluated with the assistance of professional consultants before the product enters a U.S. or international market.

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