I am in the planning stages of a retail business and would like to carry as many locally-made items as possible. As these will be cottage industry-type items, they will not be coming from large manufacturers who carry some sort of product liability insurance. What sort of liability, if any, am I taking on in carrying items made by artisans? How does this change if the item is for a child (such as a hairbow)?
With a product liability claim anyone in the distribution chain can be held liable for a defective product. The reason is because the law believes manufacturers and suppliers are in a better position to make commercial products safe and to insure against defects than consumers who had nothing to do with the research, design, manufacturing and packaging of a product.
Carrying items made by artisens for sale may pose special risks in that quality control in the design and manufacturing of the products may not be up to the standards of larger scale commercial manufacturers and sellers. On the flip side, perhaps due to the custom nature of the artistic products, which can require more time and attention to create than mass produced goods, the quality may be higher.
Products liability can encompass strict liability, negligence, and warning defects. Liability can arise from design or manufacturing defects, negligence or insufficient warnings of product risks.
The age of the target consumers should not affect overall liability.
What can you do to protect yourself from liability? Obtain adequate insurance, be careful in the products you choose to sell, do as much research as is feasible before you choose to sell a given product and if ever in doubt about the safety of a product, air on the side of caution before you offer it for sale in your store.
First let me start my saying I find it very commendable that you would opt to support local manufacturers like you describe. Too bad other businesses do not follow that model. That said, the short answer to your question is, yes, your business (and you personally if you are not properly set up in a proper business structure) can be held liable for defective products in Missouri as a mere retailer even if you do not manufacture the products. Laws like this were created with the intent to make the companies who profit from the placement of the products into the stream of commerce liable if a product is defective and causes injury. Companies like Wal-Mart are regularly sued for products made in China under this law. Without such laws injured people would have no recourse as suing a Chinese company is much like trying to herd cats--you cannot do it. In Missouri the state of the law is such that an innocent seller can be excused from liability if, after the lawsuit is filed, you can identify the manufacturer and then show the manufacturer has ample assets or insurance to cover the lawsuit. There are many exceptions to this general rule at present. You should be sure you have ample insurance coverage and also discuss with an attorney how to set up your company in a proper corporate form to insulate your personal assets from lawsuits.
Retail distributors of a defective product can certainly be held legally liable. However, the type of claim is much different than that against the actual manufacturer. You could potentially have a strict liability claim against the manufacturer in a traditional products liability claim. If you are filing against a retailer or distributor, it would be a garden variety negligence claim.
I agree with the previous responses and would add that not only should you have adequate insurance, but you should insist on having indemnity provisions in your contracts with your suppliers. If a product is sold new, the liability for the retailer that did not alter or assemble the product, is often pass-through. An indemnity provision will require the manufacturer or domestic importer to defend you, pay the costs of the defense and pay any settlement. Make sure that you discuss these topics with you insurance agent. In some states, like MS, there must be independent negligence on the part of the retailer to name them in the lawsuit.
Anyone who is opening a retail business should do so in conjunction with the input from a business attorney, who can advise you on various legal matters, including appropriate insurance coverage. Sellers of goods which are deemed to be unreasonably dangerous are equally liable with the manufacturer under product liability law. You need to have an insurance policy which adequately protects you from potential claims, particularly if you anticipate problems arising from manufacturers who may not have coverage of their own. You would be foolhardy to operate a business without appropriate coverage. Speak with your business attorney.
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Mr. Lundeen is licensed to practice law in Florida and Vermont. The response herein is not legal advice and does not create an attorney/client relationship. The response is in the form of legal education and is intended to provide general information about the matter within the question. Oftentimes the question does not include significant and important facts and timelines that, if known, could significantly change the reply and make it unsuitable. Mr. Lundeen strongly advises the questioner to confer with an attorney in your state in order to ensure proper advice is received.
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