Starting a business has its share of risks and rewards. However, businesses that fail to conduct routine assessments of their manufacturing processes or perform quality assurance checks are exposing themselves to legal trouble.
Any business that sells distributes or manufactures a product can be vulnerable to product liability claims. The consequences of these types of lawsuits can be devastating. Businesses face losing the trust of their customers and may have to pay hundreds of thousands to millions of dollars if found guilty.
A product liability claim accuses a business of producing a product that results in physical or mental harm. Unlike other types of legal claims, the intent is not considered under product liability. Businesses do not need to purposefully harm consumers to be responsible for product liability claims.
Product liability falls into three broad categories.
Also known as marketing defects, failure to warn claims suggests that a business did not properly notify consumers of a harmful side effect of using their products. This could occur in several ways.
A business that does not publicize the potential risks of using its products improperly could be liable under a failure to warn claim. If used properly, marketing defect claims can also apply to products that produce negative results.
One of the most high-profile failure-to-warn cases involves tobacco and vaping products. Despite decades of research indicating a link between smoking and lung cancer, cigarette companies did not advertise the adverse health effects caused by their products.
The most recent cases focus on e-cigarette producers, like Juul, which deceptively advertise their products as low-risk smoking options. Juul compensation claims to date exceed $400 million.
These defects occur when a product is not assembled or produced as expected. Manufacturing defects can occur at any point in the distribution process. Businesses have a strict liability to ensure that defective products do not reach consumers. Otherwise, they may be held responsible for any resulting injuries.
The food and automotive industries experience significant manufacturing defects claims. For example, airbag manufacturer Takata produced millions of airbags with a defect that created shrapnel upon impact.
Despite knowing about this defect since 2004, the company did not recall its airbags until 2014. In the interim, hundreds of people were injured and over a dozen died as a result of Takata airbags. The Japanese firm was ordered to pay $1 billion in product liability claims.
Food producers can face claims due to contamination or foreign objects entering their products. One notable case in 2009 was when poor manufacturing conditions at the Peanut Corporation in America led to a recall of more than 3,000 peanut butter products with deadly salmonella.
Dangerous design is similar to manufacturing defects except that the dangerous element is an intentional element of the product. Businesses are responsible for safety testing their products. Failure to distribute the safest design can result in a product liability claim.
Many design defect cases are against children and infant product manufacturers. Items for young children must adhere to rigorous safety standards to prevent injuries and harm. Toys that can break into smaller pieces or contain sharp edges could harm young children. Improper design of cribs and infant bedding can increase the chances of injury.
Dangerous design can also affect older consumers. For example, electronic products that do not include industry-standard safeguards can cause products to overheat and even catch on fire.
Design defects can also include cases where the product is not suitable for uses suggested by the manufacturer or seller. Under a breach of warranty of fitness claim, the consumer may be harmed due to the normal and intended use of a product. An example is an advertised shelf with a weight capacity of 20 pounds but buckles under a lighter load.
Businesses can reduce their risk of product liability by implementing robust recall policies. A recall is a formal announcement of a product's defects and a request for distributors and consumers to refrain from using the product.
While recalls do not protect businesses against liability lawsuits, they also do not serve as evidence of any wrongdoing in a civil case. That is because the plaintiff must also prove they sustain harm from the product.
Since companies are ultimately responsible for defects occurring anywhere in the production chain. Therefore, businesses must review their vendors and suppliers regularly. This includes routine product testing and site inspections. Businesses should also print visible warnings to inform consumers of any potential dangers from using or misusing the product.