Managing Your Product Liability Risks

Managing Your Product Liability Risks

Product liability is a serious risk for manufacturers and suppliers. If a product is linked to injuries, multiple lawsuits may result, and each one can lead to expensive court fees and large awards, as well as damage to the company’s reputation. Mitigating this risk should be a top priority.

Product-Related Injuries Are Common

Every year, millions of Americans experience product-related injuries. According to the National Safety Council, a report from the Consumer Product Safety Commission shows that nearly 11 million people went to the emergency room due to product-related injuries in 2020.

Many injuries are caused by everyday objects that are not usually considered dangerous, including pillows and furniture. Some of the highest injury rates occur among children aged zero to four, and soaps and detergents are responsible for many of these injuries. Television sets and stands also cause many injuries among young children.

Product Liability Defects

Claims of product liability can stem from three types of defects:

  • Marketing defects: The instructions or warnings were not sufficient to protect consumers.
  • Manufacturing defects: A flaw occurred in the manufacturing process.
  • Design defects: The defect stems from the way the product was designed.

According to the Legal Information Institute, when determining whether a product has a design defect, 47 states put the burden of proof with the plaintiff. The exceptions are Alaska, California and Hawaii. In these three states, the defendant must demonstrate that there is no design defect.

The Impact of Product Liability Claims

Product-related injuries can be disastrous for companies. The possible fallout includes recalls, lawsuits, regulatory action and reputational damage.

Recently, Peloton has made headlines over injuries connected to its treadmills. According to ABC News, multiple families have reported children being hurt by the Peloton Tread+, and at least one child has died. One family, whose four-year-old suffered third-degree burns after getting pinned under the treadmill, is suing the company. Fox News reports that a California woman is filing a class-action lawsuit alleging that the product was advertised as family-friendly. According to Reuters, Peloton has recalled the treadmills after first denying that there was an issue, and U.S. regulators are now investigating the company over the injuries.

Johnson & Johnson has also been involved in a high-profile product liability case. In this case, the allegations state that the company’s baby powder and other talc products contain asbestos and have been linked to ovarian cancer in women. According to CNBC, the Supreme Court has rejected an appeal to overturn a $2.1 billion damages award against the company. Johnson & Johnson is facing more than 21,800 lawsuits related to its talc products.

Distribution Chain Exposures

In a recent case, Loomis v. LLC, a plaintiff filed a claim against Amazon because she was injured by a hoverboard she purchased from an Amazon reseller. Amazon argued it was not liable because it was just a service provider – not a manufacturer or supplier. The court sided with the plaintiff and found that Amazon’s business practices make it a direct link in the vertical chain of distribution. This decision makes it clear that product liability can extend beyond the manufacturer and seller in some cases.

Manage Your Product Liability Risks

  1. Consider product liability issues at every stage, from design to manufacturing to marketing. Make sure that you and your partners are meeting high safety standards, and address liability issues in your contracts.
  2. Create a business response plan in case product liability issues emerge. Quick action may prevent additional injuries and reduce reputational damage.
  3. Talk to your insurer about product liability insurance coverage. Product liability insurance, which is a separate policy, can cover defense costs and settlements or judgements. You may also want to add separate coverage for recalls.

Wilson, Washburn & Forster is a boutique independent insurance agency that has been in business since 1961. We provide specialized insurance services for manufacturers and can help you protect your company against product liability exposures. You will find that our experience, claims handling, service, and community commitment is unrivaled. 

Contact us today for a complimentary analysis of your current insurance program by an insurance specialist in this field at 786-454-8384.

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