Risk Management: Protect Yourself from Product Liability Lawsuits
The national news is full of lawsuits involving companies and customers alleging product liability. Below is a sampling and also a few ideas on how to reduce or eliminate your product liability risk.
HistoryIn 1998, Dow Corning was sued for $4.2 billion by 170,000 customers claiming that their silicone breast implants ruptured, causing bodily harm, scleroderma, or death. Because of the outstanding number of cases against the company, Dow Corning settled for $3.2 billion (CNN Money).
In December of 1998, Owens Corning Corp. had approximately 176,000 product liability lawsuits filed against them by customers claiming that their asbestos building materials caused mesothelioma cancer and death. Though Owens Corning Corp. offered to settle at $1.2 billion, the lawsuits kept coming, and by 2000 they had to file bankruptcy to settle the then more than 200,000 claims. In 2006, the company created the Owens Corning Fibreboard Asbestos Personal Injury Trust, and in 2011, Owens Corning ended up selling over 7,000,000 shares of stock in order to accommodate the growing number of claims (Asbestos.com).
In 2012, Blitz USA - a 46-year old Oklahoma gas can manufacturing company - closed its doors as a result of 62 lawsuits and over $30 million in legal fees since 1994. Many of the injuries for which they were sued were due to obvious misuse of the cans, such as pouring gasoline over an open fire. Though only two cases made it to court, and only one won, the numerous settlements paid out over the years eventually broke them (The New York Times).
Blitz USA is a prime example of how product liability suits can break a company, and the other two are prime examples of just how costly a product mishap can be. Though two of the aforementioned lawsuits dealt with hundreds of thousands of individuals, when you are a small corporation, even one product liability lawsuit can hurt you. At Garcia & Gurney, ALC, our business attorneys understand this better than most, which is why we encourage our clients to avoid product liability suits by instating a comprehensive product liability protection program.
Eliminate Product Liability RiskAt Garcia & Gurney, ALC, our Pleasanton business attorneys help clients safeguard against product liability claims by helping them do the following:
1. Transfer risk: When forming a business relationship with new manufacturers or suppliers, protect yourself by drafting legal agreements designed to transfer risk to liable parties. Two types of effective risk transferring agreements include:
a. Hold Harmless Agreements: These help to ensure that your contractors and suppliers are contractually responsible for any negligence and/or omissions in the event of a claim.
b. Statements of Financial Responsibility: These are essentially certificates of insurance, which allow you to avoid financial responsibility for product-related claims by confirming that the manufacturer or supplier is appropriately covered in the event of a product liability claim.
2. Build safety into design: One of the best ways to avoid product liability claims is to build safety into the design of the product. When in the initial design phase, carefully consider how the product will be used, and try to envision what sorts of problems/hazards the everyday use of your product will present to consumers. Furthermore, make sure that your design complies will all federal and state government regulations regarding product safety, and that safety warnings are adequately posted on both the product and its packaging. Finally, conduct safety reviews frequently, as federal and state regulations are always changing.
3. Keep copies of your records: As a manufacturer, it is imperative that you keep copies of all records and correspondence with the customer. Copies of records and correspondence include:
a. Design specs and product orders including the documentation of any changes made by the customer to the original design, specs of the final design, and proof that the customer signed off on the final design.
b. Written procedures and instructions that clearly outline the manufacturing process, and that indicate where quality control steps were implemented.
c. Enable and review customer feedback: So many product mishaps and liability suits could have been avoided had the manufacturer, supplier, and or seller just reviewed what their customers had to say regarding the product. Oftentimes, consumers will complain about the difficulty they had with a certain aspect of a product, or how a product failed them when they used it in a certain way. This kind of information can prove to be extremely beneficial to a company, as it not only gives them a chance to improve their product, but it also gives them a chance to fix a potentially hazardous issue with their product.