Product Liability In developing your new product concept

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

Product Liability Product Hazard Personal Injury Inferior Product Disappointment, no harm done

Products commonly subjected to product liability claims automobiles toys personal care products appliances exercise equipment

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.

No Surprises • The product should meet the expectations of the consumer e. g. should not find a metal screw in a bottle of soda

The 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.

The Sale For 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.

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.

Types of Defects Manufacturing Defects Design Defects Warning Defects

Manufacturing Defects A manufacturing defect exists when the product does not conform to the manufacturer’s 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.

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.

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.

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

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. ”

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.

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 his finger

The Unavoidably Unsafe Product The unavoidably unsafe product is one which simply cannot be made safer given present knowhow 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.

Main Theories of Product Liability – Legalities (1) Strict Liability (2) Negligence (3) Breach of Warranty (4) Intentional

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 product’s 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.

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?

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)

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).

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.

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.

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.

Responsible Parties: Seller of Used Products 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.

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.

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.

Judgment and Settlement and Release Verdict: either by judge or jury, where liability is determined first, followed by a 2 nd 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.

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.

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.