Product Liability

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Product Liability
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Product Liability
Product Liability

• In developing your new product concept, keep the
  term product liability in the back of your head.
  It can be very expensive if you have to
• recall your product after launch because of a
  defect
• you are being sued because of a defective
  product that resulted in personal injury.
• It could be the end of your company

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Product Liability
Product Hazard
Inferior Product
Personal Injury
Disappointment, no harm done
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Products commonly subjected to product liability
claims
automobiles
toys
personal care products
appliances
exercise equipment
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Defective Products

• Product liability law deals with the placement
  of defective product into the hands of the
  consumer by the seller of the product.
• The product is therefore unsatisfactory in some
  way when it reaches the consumer.
• Responsibility of the defect rests with all
  sellers of the product who are in the
  distribution chain.

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No Surprises

• The product should meet the expectations of the
  consumer
• e.g. should not find a metal screw in a bottle
  of soda

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The Product
Product generally refers to something tangible,
however, in the context of product liability law,
it has been expanded to include intangible items
such as electric power delivered to your home.
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For Sale
The Sale

• An important component of product liability is
  that there is a sale of the defective product.
• The injured person does not have to be the
  purchaser of the product in order to recover
  damages a bystander has just as much right
  to recover damages as the purchaser or user of
  the product.

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The Defect
In product liability law, defect generally refers
to some problem, weakness, omission or error
existing in the product which renders it unsafe.
It is not the mere fact that a defect exists
which confers liability as long as the defect
does not present any unreasonable danger. e.g.
you only got five sticks of gum rather than the
intended six, , the mislabeling is an obvious
defect but it does not render the product unsafe.
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Types of Defects
Manufacturing Defects Design Defects Warning
Defects
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Manufacturing Defects
A manufacturing defect exists when the product
does not conform to the manufacturers own
specification. From a legal standpoint, this is
very easy to prove (e.g. screw in soda can).
These defects can occur randomly, so a
manufacturing defect is not common to all of the
products.
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Design Defects
Design defect refers to a defect common to the
product itself, and is usually common to the
entire line of products.

• A product may be designed defectively if it is
  found that it fails to perform safely according
  to ordinary consumer expectations.
• A product may be deemed defectively designed if
  there was a cost effective alternative design
  which could have prevented risk of injury.
• A product can be deemed unreasonably dangerous
  even though no safer design was possible, in
  effect saying it should have never been
  manufactured.

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Warning Defects
Warning defects usually involve lack of a written
document that accompanies the product. A warning
defect usually applied to the whole of products.
A manufacturer of microwave dinners for example
might omit a warning on the package to remove the
packaging before microwaving the food product, or
it will burst into flames. This omission makes
the product unreasonably dangerous.
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How do courts test for defectiveness ?
A variety of tests have been used by the courts
to establish product defectiveness

• Ordinary Consumer Expectation
• Expert Testimony
• Risk/Utility Analysis
• Unavoidable Unsafe Product

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Ordinary Consumer Expectation
The most common standard implemented by the
courts in a defective product case is
- dangerous to an extent beyond that which
would be contemplated by the ordinary consumer
who purchases it, with ordinary knowledge common
to the community as to its characteristics.
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Expert Testimony
The ordinary consumer expectation test does not
always work, understanding the details of the
defect may be beyond the laypersons scope of
knowledge.
e.g. if a swing set claims to support an 80 lb
child, yet it collapses under the weight of a 50
lb child, expert testimony may be necessary to
evaluate the metal of the swing set. This may be
required to find out if the defect is design or
manufacture.
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Risk / Utility Analysis

• Examine cost of making product safer is weighed
  against
• the risk of personal injury present if safety
  measures are
• not implemented.

e.g. put a sensor/alarm system on a hammer to
warn the user that he might hit his finger
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The Unavoidably Unsafe Product
The unavoidably unsafe product is one which
simply cannot be made safer given present
know-how and technology - drugs are a good example
For example, child immunizations have been
alleged to result in mild or severe reactions,
but in the bigger picture, the risk of the child
contracting a serious disease or the risk of
non-immunized children spreading disease, is far
greater than the risk of the side effects from
the immunization itself. The seller of the
product must provide the consumer with the
dangers and risks so the consumer can make an
informed decision.
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Main Theories of Product Liability Legalities

1. Strict Liability
2. Negligence
3. Breach of Warranty
4. Intentional

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Strict Liability
The liability of manufacturers, for harm caused
by their defective products, without any
necessity for the plaintiff to prove fault on the
part of the manufacturer. Under strict
liability, the issues are product oriented. For
example Does the product meet manufacturer
specifications? Does the product provide adequate
warnings? Does the products design render it
unsafe in comparison to the design of comparable
products. There is no concern for the good or
evil intentions of the manufacturer.
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Negligence
Unlike the strict liability situation, a
negligence claim is conduct oriented and not
product oriented. For example Did the
manufacturer adequately test the product before
placing it on the market ? Did the manufacturer
cut cost corners thereby making an inferior
product?
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Breach of Warranty
3 years, 36000 miles

• Written promise the product will perform
  (express)
• Implied representation that product is free of
  defects (implied)
• The warranty includes the obligation that the
  product meets the needs of a particular purpose
  (implied warranty of fitness for a particular
  purpose)

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Intentional
Intentional differs from an act of negligence in
that as the name implies it requires an
element of intent (manufacturer knows about a
defect but ignores it).
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Responsible Parties

• Product liability action rests with all of the
  parties in the chain of the distribution and
  marketing of the product
• If applicable, the assembler or installer, and
  the reseller in the case of a used or rebuilt
  product. Others may be held liable if it is
  found that they in some way benefited from the
  sale of the defective product. For example,
  liability could be extended to leasing or rental
  companies. In drug and medical device
  situations, liability may also be extended to the
  physician or medical provider.

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Responsible Parties The Manufacturer
The manufacturer can, in principle, be liable
under strict liability, negligence and breach of
warranty. The rule not only applies the
manufacturer of the finished product, but to the
manufacturer of any component of the finished
product if the component was defective when it
left the hands of the component manufacturer.
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Responsible Parties The Retailer
One who puts out as his own product a product
that is manufactured by another is subject to the
same liability as though he were the manufacturer.
Although sellers in the distribution chain are
theoretically liable, the retailer is not
involved in the actual manufacturing.
Nevertheless, if the retailer undertakes
inspecting or assembling the product before it is
sold, it must take reasonable care in this
assembly or inspection not to be liable.
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Responsible Parties Seller of Used Products
Best Buy Used Cars
A person who engages in buying or selling used
products is generally not susceptible to strict
liability because the chain of distribution has
been broken. If the reseller does something
intrusive with the product prior to resale,
he/she may be liable under a theory of secondary
manufacture if what he/she did resulted in a
defective condition.
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Responsible Parties The Assembler or Installer
A perfectly fine product may become defective if
it is assembled incorrectly. In general, this
would confer the same liability on the assembler
or installer. If the assembler puts together a
defective product from the manufacturer - ???
liability may turn in their ability to detect the
defect during assembly or installation.
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Responsible Parties Physician or Medical Provider
In the area of drug and medical device
litigation, the physical or medical provider may
be held liable on the basis that they, as trained
intermediaries, have a duty to inform the patient
of the risks of the products prescribed, so
patient can make an informed decision. The
manufacturer relies on the physician to
adequately inform the patient based on the
information provided by the manufacturer.
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Judgment and Settlement and Release
Verdict either by judge or jury, where liability
is determined first, followed by a 2nd trial to
decide on damages. Arbitration A third party
(arbitrator) listens to the arguments and renders
a decision. Settlement most product liability
claims are settled outside of court a mutual
agreement by both parties to terminate the
dispute, usually for a sum of money.
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Damages

• Compensatory compensate party (money) for
  medical expenses, lost earnings, pain and
  suffering, injury to personal property.
• Punitive involves an award of a substantial sum
  of money to the affected party for the purpose of
  punishing the defendant.
• Nominal usually involves a very small sum of
  money, to show that the plaintiff was legally
  wronged most of the time, injuries are
  inconsequential.

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Summary
What can go wrong will go wrong. Think through
your product concepts (long term thinking) to
make sure that product liability will not affect
you.