Product LiabilityProduct Liability

SAI KRISHNA CHARY KUMBOJUSAI KRISHNA CHARY KUMBOJU

SRIKANTH BANDARUSRIKANTH BANDARU

DAVID DRISKODAVID DRISKO

IntroductionIntroduction

Estimated that 50 million product Estimated that 50 million product accidents occur annuallyaccidents occur annually

Costs businesses and organizations Costs businesses and organizations $50 billion (U.S.)$50 billion (U.S.)

Causes increase in insurance costsCauses increase in insurance costs Large companies can pass the Large companies can pass the

expenditure to the customersexpenditure to the customers Small businesses often go bankruptSmall businesses often go bankrupt

Product LiabilityProduct Liability

the responsibility of manufacturers, the responsibility of manufacturers, distributors and sellers of products to distributors and sellers of products to the public, to deliver products free of the public, to deliver products free of defects which harm an individual or defects which harm an individual or numerous persons and to make good numerous persons and to make good on that responsibility if their products on that responsibility if their products are defective are defective

3 Main Areas of Product Liability3 Main Areas of Product Liability

Behavior and knowledge of the userBehavior and knowledge of the user Environment where the product is Environment where the product is

usedused Design flawsDesign flaws The first two are difficult to mitigateThe first two are difficult to mitigate Design flaws is the area that TQM Design flaws is the area that TQM

has the greatest control overhas the greatest control over

Brief HistoryBrief History

Ancient TimesAncient Times Sample of grain covers whole harvestSample of grain covers whole harvest

1414thth Century Century Very difficult to sue manufacturer, Very difficult to sue manufacturer,

simple productssimple products Mid 1700’sMid 1700’s

Caveat emptor was the prevailing legal Caveat emptor was the prevailing legal mindsetmindset

Caveat EmptorCaveat Emptor

Buyer Beware – Buyer Beware – based on Smith’s based on Smith’s economy policieseconomy policies

Privacy of contractPrivacy of contract Allowed lawsuits Allowed lawsuits

only one step only one step Fostered Industrial Fostered Industrial

Revolution by Revolution by limiting limiting manufacturers manufacturers liabilityliability

Step of ProductsStep of Products ManufacturerManufacturer WholesalerWholesaler RetailerRetailer CustomerCustomer ““Customer” refers Customer” refers

to the person who to the person who actually bought the actually bought the itemitem

Government Steps InGovernment Steps In

Inherent or imminently dangerous Inherent or imminently dangerous products need regulationproducts need regulation

1906 Congress passes Federal Food 1906 Congress passes Federal Food and Drug Actand Drug Act

Creates government oversight of Creates government oversight of food and drugsfood and drugs

Allows product liability lawsuits to be Allows product liability lawsuits to be brought against drug manufacturersbrought against drug manufacturers

MacPherson v. Buick Motor Co.MacPherson v. Buick Motor Co.

1916 Landmark case for products 1916 Landmark case for products liabilityliability

Made manufacturer liable to final Made manufacturer liable to final customercustomer

This case is the reason tires are not This case is the reason tires are not covered under car warranteescovered under car warrantees

Product Safety LawProduct Safety Law

Consumer Product Safety Act 1972Consumer Product Safety Act 1972 Protects consumers from unreasonable riskProtects consumers from unreasonable risk Establishes uniform safety standardsEstablishes uniform safety standards Research and investigation into cause and Research and investigation into cause and

prevention of related deaths, injury, or illnessprevention of related deaths, injury, or illness Only covers products used in or around Only covers products used in or around

household and schools and for recreationhousehold and schools and for recreation ExemptionsExemptions

Cars, boats, planes, food, drugs, tobacco, and Cars, boats, planes, food, drugs, tobacco, and poisonpoison

Product Liability LawProduct Liability Law

Tort of negligenceTort of negligence

Tort of strict liabilityTort of strict liability

Contract law of sales or warrantyContract law of sales or warranty

Tort of NegligenceTort of Negligence

Classic theory of products liabilityClassic theory of products liability Must prove manufacturer was Must prove manufacturer was

carelesscareless Focuses on manufacturer’s conductFocuses on manufacturer’s conduct Varies from state to stateVaries from state to state Most states going away from Most states going away from

allowing product liability under allowing product liability under negligencenegligence

Tort of Strict LiabilityTort of Strict Liability

One who sells a product in a defective One who sells a product in a defective condition that is unreasonably dangerous condition that is unreasonably dangerous to a consumer is liable for harm caused to to a consumer is liable for harm caused to the user or the user’s propertythe user or the user’s property

Product Liability sued under this tort in Product Liability sued under this tort in many statesmany states

Allows the injured party to sue all the way Allows the injured party to sue all the way through the steps of productsthrough the steps of products

Allows user of product to sue not just Allows user of product to sue not just purchaser of productpurchaser of product

Contract Law of Sales or WarrantyContract Law of Sales or Warranty

Express WarrantyExpress Warranty Material statement made voluntarily by Material statement made voluntarily by

a manufacturer or merchant in sales a manufacturer or merchant in sales brochures or sales talk to induce salesbrochures or sales talk to induce sales

Implied WarrantyImplied Warranty Implies that the product is reasonably fit Implies that the product is reasonably fit

for the general purpose for which the for the general purpose for which the product was designedproduct was designed

Cannot be waived; required by lawCannot be waived; required by law

Defenses to Product LiabilityDefenses to Product Liability

Defendant tries to proveDefendant tries to prove Plaintiff’s bad judgmentPlaintiff’s bad judgment Plaintiff’s failure to maintain the product Plaintiff’s failure to maintain the product

properlyproperly Plaintiff’s improper use of productPlaintiff’s improper use of product

Comparative NegligenceComparative Negligence Assumption of RiskAssumption of Risk MisuseMisuse Statutes of ReposeStatutes of Repose

Financial LossFinancial Loss

Product Liability suits cost a lot of moneyProduct Liability suits cost a lot of money Court judgment is larges financial lossCourt judgment is larges financial loss Attorneys’ feesAttorneys’ fees Technical expert feesTechnical expert fees Investigation feesInvestigation fees

Other costsOther costs Increased liability insuranceIncreased liability insurance Recall, replacement, or repair of productRecall, replacement, or repair of product Damage to reputation and customer baseDamage to reputation and customer base Hold or delay in production due to potential defectHold or delay in production due to potential defect Increased quality efforts for prevention appraisalIncreased quality efforts for prevention appraisal

PreventionPrevention 17 Areas for Prevention17 Areas for Prevention

OrganizationOrganization EducationEducation New-Product ReviewNew-Product Review Initial Production Review and Periodic Production AuditsInitial Production Review and Periodic Production Audits Control of Warranties, Advertisements, Agreements, and Control of Warranties, Advertisements, Agreements, and

the Likethe Like Warning Labels and InstructionsWarning Labels and Instructions Complaints and ClaimsComplaints and Claims Retention of Records and Document ControlRetention of Records and Document Control ISO 9000 DocumentsISO 9000 Documents Product-Recall PlanProduct-Recall Plan Subrogation, Risk Criteria, Standards, Audits, Customer Subrogation, Risk Criteria, Standards, Audits, Customer

Service, RedressService, Redress

OrganizationOrganization

Organizational structure must specify Organizational structure must specify responsibilities and have the responsibilities and have the necessary authority to achieve those necessary authority to achieve those responsibilitiesresponsibilities

Formal product-safety committee Formal product-safety committee should be establishedshould be established

Organization should have a safety Organization should have a safety engineer, either hired or selected engineer, either hired or selected from withinfrom within

EducationEducation

Cornerstone of effective programCornerstone of effective program Emphasize the importance of product Emphasize the importance of product

safety to all employeessafety to all employees Ensure education of new or Ensure education of new or

transferred employeestransferred employees Continuing education is part of a plan Continuing education is part of a plan

of actionof action

New-Product ReviewNew-Product Review

Establish product review team that has no Establish product review team that has no preconceived notions about the productpreconceived notions about the product

Should check for the following:Should check for the following:

Crushing Hazards

Shearing Hazards

Cutting Hazards

Entanglement Hazards

Drawing-in or Trapping Hazards

Impact Hazards

Puncture Hazards

Abrasion Hazards

Exposed live part – electrical hazards

Electrostatic Exposure

Thermo Hazards (exposed high temperature parts)

Noise Hazards (exposed to high sound frequencies)

Exposure to gases or fumes hazards

Fire or explosion hazards

Unexpected start-up hazards

Attorneys have won many cases because organizations did not consider reasonably foreseeable uses of the product

Initial Production ReviewInitial Production Review

Usually conducted on prototypeUsually conducted on prototype The review evaluates the manufacturing The review evaluates the manufacturing

plan to determine adequacy of:plan to determine adequacy of:

Failure Mode and Effect Analysis (FMEA)

Tooling and work-holding devices

Production machinery

Materials handling

Test Equipment

Inspection system

Sampling plan

Packaging and Shipping

Operating instructions

Safety warnings

Advanced service information for distributors and dealers

Inherently hazardous products should have a limited production run and controlled distribution to collect better information

Periodic audits should be conducted to verify or validate quality control systems as part of ISO 9000 requirements

Control of Warranties, Advertisements, Control of Warranties, Advertisements, Agreements, and the LikeAgreements, and the Like

Product Safety Committee must continually review Product Safety Committee must continually review all literature and publications for the productall literature and publications for the product Check to determine that terms and conditions of sale are Check to determine that terms and conditions of sale are

limited to statements of merchantability, product is of limited to statements of merchantability, product is of good material and workmanship. Avoid phrases like good material and workmanship. Avoid phrases like “Safe” or “Ensures the safety of the operator”“Safe” or “Ensures the safety of the operator”

All literature should be reviewed by legal counselAll literature should be reviewed by legal counsel Examination of purchase orders to determine any special Examination of purchase orders to determine any special

warranty provisionswarranty provisions Analyze dealer distributorship and franchise agreements Analyze dealer distributorship and franchise agreements

to determine the handling of “defective” itemsto determine the handling of “defective” items Determine that words like nonconformity and Determine that words like nonconformity and

nonconforming units have been used where appropriatenonconforming units have been used where appropriate Evaluate cost problems of warrantiesEvaluate cost problems of warranties

Warning Labels and InstructionsWarning Labels and Instructions

Largest cause of manufacture negligence is Largest cause of manufacture negligence is inadequate or non-existent warningsinadequate or non-existent warnings

Warnings and Instructions are separate itemsWarnings and Instructions are separate items Should be written by someone with no Should be written by someone with no

technical knowledge along with a product technical knowledge along with a product engineerengineer

ANSI has developed standards for warning ANSI has developed standards for warning labelslabels

Avoid overuse of warnings as that may Avoid overuse of warnings as that may detract form the importance of the warningsdetract form the importance of the warnings

Complaints and ClaimsComplaints and Claims Complaints and claims alert the manufacturer to the need Complaints and claims alert the manufacturer to the need

for corrective actionfor corrective action Immediately investigate any claim or complaint involving Immediately investigate any claim or complaint involving

bodily injury, property damage, or product safetybodily injury, property damage, or product safety Product Safety Engineer should determine the following:Product Safety Engineer should determine the following:

The appropriate departments should be notified of the The appropriate departments should be notified of the findings of the complaint or claimfindings of the complaint or claim

the cause of claim or complaint

nature and seriousness of injury, if one occurred

the failure mode that caused the situation, if there was one

the age of the defect and whether it was present when the product was sold

the negligence of the parties

Retention of Records and Document controlRetention of Records and Document control

Records and documents will be required if an Records and documents will be required if an organization ever has to defend its productorganization ever has to defend its product

Types of records that should be kept areTypes of records that should be kept are Product development and test recordsProduct development and test records Results of process, product, and system inspections and auditsResults of process, product, and system inspections and audits Original design dataOriginal design data Service-life dataService-life data Acceptance and approvals from government agencies or Acceptance and approvals from government agencies or

independent testing organizationsindependent testing organizations Critical Raw material acceptance lettersCritical Raw material acceptance letters

Documents should be centrally located and Documents should be centrally located and protected from lossprotected from loss

ISO 9000 DocumentsISO 9000 Documents

A product liability lawsuit represents A product liability lawsuit represents the ultimate quality failure of a the ultimate quality failure of a productproduct

A manufacturer without a formal A manufacturer without a formal quality program is viewed as quality program is viewed as negligent in its internal efforts to negligent in its internal efforts to prevent product defectsprevent product defects

ISO 9000 documents should be ISO 9000 documents should be prepared carefullyprepared carefully

Product-Recall PlanProduct-Recall Plan

An effective recall contingency plan helps minimize An effective recall contingency plan helps minimize the recall costs and the products liability riskthe recall costs and the products liability risk

Three factors must be considered when Three factors must be considered when determining if a recall is neededdetermining if a recall is needed The maximum exposure to personal injury or property The maximum exposure to personal injury or property

damage if the product is not recalled. This determination damage if the product is not recalled. This determination will be based on pattern of defect, the quantity involved, will be based on pattern of defect, the quantity involved, the severity of risk, and the cost of the recallthe severity of risk, and the cost of the recall

The form of communication (radio, TV, newspaper, The form of communication (radio, TV, newspaper, telephone, and registered letter) used to contact the telephone, and registered letter) used to contact the users of the productusers of the product

Determining if the product will be repaired or replaced or Determining if the product will be repaired or replaced or if the customer will be reimbursedif the customer will be reimbursed

Subrogation, Risk Criteria, Standards, Audit, Customer Subrogation, Risk Criteria, Standards, Audit, Customer Service, and RedressService, and Redress

Visit the supplier plant and audit its prevention programVisit the supplier plant and audit its prevention program A degree of prevention control is based off the degree of A degree of prevention control is based off the degree of

potential liability losspotential liability loss Manufacturers should develop design and manufacturing Manufacturers should develop design and manufacturing

standardsstandards Periodic audits are useful tools for measuring progress and Periodic audits are useful tools for measuring progress and

providing feedback to improve the prevention programproviding feedback to improve the prevention program An effective customer service may reduce the likelihood of a An effective customer service may reduce the likelihood of a

lawsuit. Customer service should report observations on how lawsuit. Customer service should report observations on how the product is being used or misused and any near missesthe product is being used or misused and any near misses

Customers will usually accept failures if redress covers them Customers will usually accept failures if redress covers them with:with: A warranty policy that responds to customer needsA warranty policy that responds to customer needs The availability of information concerning the redress procedureThe availability of information concerning the redress procedure Prompt handling of complaints, returns, and claimsPrompt handling of complaints, returns, and claims Repair facilities that give prompt, skilled, and fair-priced serviceRepair facilities that give prompt, skilled, and fair-priced service

TQM PrinciplesTQM Principles LeadershipLeadership

Establishes formal product safety committeesEstablishes formal product safety committees Customer SatisfactionCustomer Satisfaction

Ensures a safe reliable product for all customersEnsures a safe reliable product for all customers Employee InvolvementEmployee Involvement

Effective education that allows employees to catch potentially Effective education that allows employees to catch potentially defective productsdefective products

Continuous Process ImprovementContinuous Process Improvement All products must be regularly audited to ensure they are All products must be regularly audited to ensure they are

defect freedefect free Supplier PartnershipSupplier Partnership

Ensure that all supplied products are of the highest quality to Ensure that all supplied products are of the highest quality to prevent defectsprevent defects

Performance MeasuresPerformance Measures Allows for redesign before a product goes to market and during Allows for redesign before a product goes to market and during

production. Allows for safety recall plansproduction. Allows for safety recall plans

Break Time

10 minutes

Activity Time

• Product warnings

• but first some examples

Good Examples

More Examples

Bad Examples

Different Laws

Now it is your turn

Quiz TimeQuiz Time

Benedi v. McNeil-P.P.C.Benedi v. McNeil-P.P.C.

Benedi consumed 3 or 4 glasses of wine a Benedi consumed 3 or 4 glasses of wine a night. Benedi began taking Extra Strength night. Benedi began taking Extra Strength Tylenol for flu like symptoms. Benedi was Tylenol for flu like symptoms. Benedi was admitted to the hospital in a coma and admitted to the hospital in a coma and near death. He underwent an emergency near death. He underwent an emergency liver transplant and will have to undergo liver transplant and will have to undergo kidney dialysis for the rest of his life. Blood kidney dialysis for the rest of his life. Blood tests revealed that Benedi suffered from tests revealed that Benedi suffered from acetaminophen toxicity.acetaminophen toxicity.

ResultsResults

McNeil-P.P.C., Inc. found guilty for failure to McNeil-P.P.C., Inc. found guilty for failure to warn and ordered to pay Benedi warn and ordered to pay Benedi $7,850,000 for negligence$7,850,000 for negligence

Lakin v. Senco Products, Inc.Lakin v. Senco Products, Inc.

Senco Products produces pneumatic nail guns. Senco Products produces pneumatic nail guns. The SN325 discharges special 3.25 in. nails The SN325 discharges special 3.25 in. nails produced and sold by Senco. John Lakin was produced and sold by Senco. John Lakin was using a SN325 while building a new home. While using a SN325 while building a new home. While using the SN325 it “double fired” causing it to using the SN325 it “double fired” causing it to recoil violently backward and discharging a third recoil violently backward and discharging a third nail through the cheek and into the brain of nail through the cheek and into the brain of Lakin. Lakin now suffers permanent brain Lakin. Lakin now suffers permanent brain damage, can no longer work, and can no longer damage, can no longer work, and can no longer live with his family.live with his family.

ResultsResults

Lakin received $3.6 million, his wife received Lakin received $3.6 million, his wife received $457,000, and Senco paid $4 million in $457,000, and Senco paid $4 million in punitive damages. Evidence disclosed that punitive damages. Evidence disclosed that the SN325 double fired 1 out of every 15 the SN325 double fired 1 out of every 15 firings. Senco modified an existing model firings. Senco modified an existing model to fire longer nails but did not conduct to fire longer nails but did not conduct further testing because it rushed the further testing because it rushed the product to market to maintain its position. product to market to maintain its position. This was a design defect.This was a design defect.

Elsroth v. Johnson & JohnsonElsroth v. Johnson & Johnson

Diane Elsroth was visiting her boyfriend and Diane Elsroth was visiting her boyfriend and complained of a headache. Her boyfriend got a complained of a headache. Her boyfriend got a new bottle of Extra Strength Tylenol open the new bottle of Extra Strength Tylenol open the sealed box, removed the shrink wrap seal, and sealed box, removed the shrink wrap seal, and removed the foil seal under the lid and gave removed the foil seal under the lid and gave Elsroth a couple of them. The next morning Elsroth a couple of them. The next morning Elsroth was dead. The autopsy showed she had Elsroth was dead. The autopsy showed she had been murdered. The Tylenol capsules were been murdered. The Tylenol capsules were contaminated with potassium cyanide. John contaminated with potassium cyanide. John Elsroth sued on behalf of Diane Elsroth’s estate. Elsroth sued on behalf of Diane Elsroth’s estate. He sued for defective packaging.He sued for defective packaging.

ResultResult

Johnson & Johnson was found not liable, even Johnson & Johnson was found not liable, even though J & J knew that its product was not though J & J knew that its product was not tamper resistant to sophisticated means of tamper resistant to sophisticated means of tampering. This is considered “exotic” tampering tampering. This is considered “exotic” tampering and no organization can make a product 100% and no organization can make a product 100% tamper-proof. Under a utility/risk assessment J & tamper-proof. Under a utility/risk assessment J & J determined the packaging was not J determined the packaging was not unreasonably dangerous for its intended use. No unreasonably dangerous for its intended use. No packaging can boast that it is tamper-proof only packaging can boast that it is tamper-proof only tamper-resistant.tamper-resistant.

Any Questions?Any Questions?