Product Liability

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Product Liability

• SAI KRISHNA CHARY KUMBOJU
• SRIKANTH BANDARU
• DAVID DRISKO

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Introduction

• Estimated that 50 million product accidents occur
  annually
• Costs businesses and organizations 50 billion
  (U.S.)
• Causes increase in insurance costs
• Large companies can pass the expenditure to the
  customers
• Small businesses often go bankrupt

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Product Liability

• the responsibility of manufacturers, distributors
  and sellers of products to the public, to deliver
  products free of defects which harm an individual
  or numerous persons and to make good on that
  responsibility if their products are defective

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3 Main Areas of Product Liability

• Behavior and knowledge of the user
• Environment where the product is used
• Design flaws
• The first two are difficult to mitigate
• Design flaws is the area that TQM has the
  greatest control over

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Brief History

• Ancient Times
• Sample of grain covers whole harvest
• 14th Century
• Very difficult to sue manufacturer, simple
  products
• Mid 1700s
• Caveat emptor was the prevailing legal mindset

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Caveat Emptor

• Buyer Beware based on Smiths economy policies
• Privacy of contract
• Allowed lawsuits only one step
• Fostered Industrial Revolution by limiting
  manufacturers liability

• Step of Products
• Manufacturer
• Wholesaler
• Retailer
• Customer
• Customer refers to the person who actually
  bought the item

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Government Steps In

• Inherent or imminently dangerous products need
  regulation
• 1906 Congress passes Federal Food and Drug Act
• Creates government oversight of food and drugs
• Allows product liability lawsuits to be brought
  against drug manufacturers

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MacPherson v. Buick Motor Co.

• 1916 Landmark case for products liability
• Made manufacturer liable to final customer
• This case is the reason tires are not covered
  under car warrantees

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Product Safety Law

• Consumer Product Safety Act 1972
• Protects consumers from unreasonable risk
• Establishes uniform safety standards
• Research and investigation into cause and
  prevention of related deaths, injury, or illness
• Only covers products used in or around household
  and schools and for recreation
• Exemptions
• Cars, boats, planes, food, drugs, tobacco, and
  poison

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Product Liability Law

• Tort of negligence
• Tort of strict liability
• Contract law of sales or warranty

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Tort of Negligence

• Classic theory of products liability
• Must prove manufacturer was careless
• Focuses on manufacturers conduct
• Varies from state to state
• Most states going away from allowing product
  liability under negligence

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Tort of Strict Liability

• One who sells a product in a defective condition
  that is unreasonably dangerous to a consumer is
  liable for harm caused to the user or the users
  property
• Product Liability sued under this tort in many
  states
• Allows the injured party to sue all the way
  through the steps of products
• Allows user of product to sue not just purchaser
  of product

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Contract Law of Sales or Warranty

• Express Warranty
• Material statement made voluntarily by a
  manufacturer or merchant in sales brochures or
  sales talk to induce sales
• Implied Warranty
• Implies that the product is reasonably fit for
  the general purpose for which the product was
  designed
• Cannot be waived required by law

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Defenses to Product Liability

• Defendant tries to prove
• Plaintiffs bad judgment
• Plaintiffs failure to maintain the product
  properly
• Plaintiffs improper use of product
• Comparative Negligence
• Assumption of Risk
• Misuse
• Statutes of Repose

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Financial Loss

• Product Liability suits cost a lot of money
• Court judgment is larges financial loss
• Attorneys fees
• Technical expert fees
• Investigation fees
• Other costs
• Increased liability insurance
• Recall, replacement, or repair of product
• Damage to reputation and customer base
• Hold or delay in production due to potential
  defect
• Increased quality efforts for prevention appraisal

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Prevention

• 17 Areas for Prevention
• Organization
• Education
• New-Product Review
• Initial Production Review and Periodic Production
  Audits
• Control of Warranties, Advertisements,
  Agreements, and the Like
• Warning Labels and Instructions
• Complaints and Claims
• Retention of Records and Document Control
• ISO 9000 Documents
• Product-Recall Plan
• Subrogation, Risk Criteria, Standards, Audits,
  Customer Service, Redress

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Organization

• Organizational structure must specify
  responsibilities and have the necessary authority
  to achieve those responsibilities
• Formal product-safety committee should be
  established
• Organization should have a safety engineer,
  either hired or selected from within

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Education

• Cornerstone of effective program
• Emphasize the importance of product safety to all
  employees
• Ensure education of new or transferred employees
• Continuing education is part of a plan of action

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New-Product Review

• Establish product review team that has no
  preconceived notions about the product
• Should check for the following

Crushing Hazards Shearing Hazards Cutting
Hazards Entanglement Hazards Drawing-in or
Trapping Hazards Impact Hazards Puncture
Hazards Abrasion Hazards
Exposed live part electrical hazards Electrostat
ic Exposure Thermo Hazards (exposed high
temperature parts) Noise Hazards (exposed to high
sound frequencies) Exposure to gases or fumes
hazards
Fire or explosion hazards Unexpected start-up
hazards
Attorneys have won many cases because
organizations did not consider reasonably
foreseeable uses of the product
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Initial Production Review

• Usually conducted on prototype
• The review evaluates the manufacturing plan to
  determine adequacy of

Failure Mode and Effect Analysis (FMEA) Tooling
and work-holding devices Production
machinery Materials handling Test
Equipment Inspection system Sampling plan
Packaging and Shipping Operating
instructions Safety warnings Advanced service
information for distributors and dealers
Inherently hazardous products should have a
limited production run and controlled
distribution to collect better information
Periodic audits should be conducted to verify or
validate quality control systems as part of ISO
9000 requirements
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Control of Warranties, Advertisements,
Agreements, and the Like

• Product Safety Committee must continually review
  all literature and publications for the product
• Check to determine that terms and conditions of
  sale are limited to statements of
  merchantability, product is of good material and
  workmanship. Avoid phrases like Safe or
  Ensures the safety of the operator
• All literature should be reviewed by legal
  counsel
• Examination of purchase orders to determine any
  special warranty provisions
• Analyze dealer distributorship and franchise
  agreements to determine the handling of
  defective items
• Determine that words like nonconformity and
  nonconforming units have been used where
  appropriate
• Evaluate cost problems of warranties

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Warning Labels and Instructions

• Largest cause of manufacture negligence is
  inadequate or non-existent warnings
• Warnings and Instructions are separate items
• Should be written by someone with no technical
  knowledge along with a product engineer
• ANSI has developed standards for warning labels
• Avoid overuse of warnings as that may detract
  form the importance of the warnings

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Complaints and Claims

• Complaints and claims alert the manufacturer to
  the need for corrective action
• Immediately investigate any claim or complaint
  involving bodily injury, property damage, or
  product safety
• Product Safety Engineer should determine the
  following
• The appropriate departments should be notified of
  the findings of the complaint or claim

the cause of claim or complaint nature and
seriousness of injury, if one occurred the
failure mode that caused the situation, if there
was one the age of the defect and whether it was
present when the product was sold the negligence
of the parties
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Retention of Records and Document control

• Records and documents will be required if an
  organization ever has to defend its product
• Types of records that should be kept are
• Product development and test records
• Results of process, product, and system
  inspections and audits
• Original design data
• Service-life data
• Acceptance and approvals from government agencies
  or independent testing organizations
• Critical Raw material acceptance letters
• Documents should be centrally located and
  protected from loss

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ISO 9000 Documents

• A product liability lawsuit represents the
  ultimate quality failure of a product
• A manufacturer without a formal quality program
  is viewed as negligent in its internal efforts to
  prevent product defects
• ISO 9000 documents should be prepared carefully

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Product-Recall Plan

• An effective recall contingency plan helps
  minimize the recall costs and the products
  liability risk
• Three factors must be considered when determining
  if a recall is needed
• The maximum exposure to personal injury or
  property damage if the product is not recalled.
  This determination will be based on pattern of
  defect, the quantity involved, the severity of
  risk, and the cost of the recall
• The form of communication (radio, TV, newspaper,
  telephone, and registered letter) used to contact
  the users of the product
• Determining if the product will be repaired or
  replaced or if the customer will be reimbursed

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Subrogation, Risk Criteria, Standards, Audit,
Customer Service, and Redress

• Visit the supplier plant and audit its prevention
  program
• A degree of prevention control is based off the
  degree of potential liability loss
• Manufacturers should develop design and
  manufacturing standards
• Periodic audits are useful tools for measuring
  progress and providing feedback to improve the
  prevention program
• An effective customer service may reduce the
  likelihood of a lawsuit. Customer service should
  report observations on how the product is being
  used or misused and any near misses
• Customers will usually accept failures if redress
  covers them with
• A warranty policy that responds to customer needs
• The availability of information concerning the
  redress procedure
• Prompt handling of complaints, returns, and
  claims
• Repair facilities that give prompt, skilled, and
  fair-priced service

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TQM Principles

• Leadership
• Establishes formal product safety committees
• Customer Satisfaction
• Ensures a safe reliable product for all customers
• Employee Involvement
• Effective education that allows employees to
  catch potentially defective products
• Continuous Process Improvement
• All products must be regularly audited to ensure
  they are defect free
• Supplier Partnership
• Ensure that all supplied products are of the
  highest quality to prevent defects
• Performance Measures
• Allows for redesign before a product goes to
  market and during production. Allows for safety
  recall plans

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Break Time

• 10 minutes

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Activity Time

• Product warnings
• but first some examples

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Good Examples
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More Examples
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Bad Examples
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Different Laws
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• Now it is your turn

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Quiz Time
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Benedi v. McNeil-P.P.C.

• Benedi consumed 3 or 4 glasses of wine a night.
  Benedi began taking Extra Strength Tylenol for
  flu like symptoms. Benedi was admitted to the
  hospital in a coma and near death. He underwent
  an emergency liver transplant and will have to
  undergo kidney dialysis for the rest of his life.
  Blood tests revealed that Benedi suffered from
  acetaminophen toxicity.

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Results

• McNeil-P.P.C., Inc. found guilty for failure to
  warn and ordered to pay Benedi 7,850,000 for
  negligence

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Lakin v. Senco Products, Inc.

• Senco Products produces pneumatic nail guns. The
  SN325 discharges special 3.25 in. nails produced
  and sold by Senco. John Lakin was using a SN325
  while building a new home. While using the SN325
  it double fired causing it to recoil violently
  backward and discharging a third nail through the
  cheek and into the brain of Lakin. Lakin now
  suffers permanent brain damage, can no longer
  work, and can no longer live with his family.

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Results

• Lakin received 3.6 million, his wife received
  457,000, and Senco paid 4 million in punitive
  damages. Evidence disclosed that the SN325 double
  fired 1 out of every 15 firings. Senco modified
  an existing model to fire longer nails but did
  not conduct further testing because it rushed the
  product to market to maintain its position. This
  was a design defect.

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Elsroth v. Johnson Johnson

• Diane Elsroth was visiting her boyfriend and
  complained of a headache. Her boyfriend got a new
  bottle of Extra Strength Tylenol open the sealed
  box, removed the shrink wrap seal, and removed
  the foil seal under the lid and gave Elsroth a
  couple of them. The next morning Elsroth was
  dead. The autopsy showed she had been murdered.
  The Tylenol capsules were contaminated with
  potassium cyanide. John Elsroth sued on behalf of
  Diane Elsroths estate. He sued for defective
  packaging.

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Result

• Johnson Johnson was found not liable, even
  though J J knew that its product was not tamper
  resistant to sophisticated means of tampering.
  This is considered exotic tampering and no
  organization can make a product 100
  tamper-proof. Under a utility/risk assessment J
  J determined the packaging was not unreasonably
  dangerous for its intended use. No packaging can
  boast that it is tamper-proof only
  tamper-resistant.

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Any Questions?