Product Liability Seminar Slides

7/24/2019 Product Liability Seminar Slides

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Managing Products LiabilityRisk for Manufacturers and

Distributors

The material provided herein is for informationalpurposes only and is not intended as legal advice or


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Current cts and !arranties

Moderator and Presenter:Hon. William A. Dreier


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Product Liability of Manufacturers"

Distributors and #ellers

1. State

A.ommon !aw".Statutoryi #ew $ersey Product !ia%ility Act

ii. onsumer &raud Act

iii. 'niform ommercial ode Warranties

(. &ederal

A. Magnusson)Moss Act

". onsumer Product Safety Act


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$%&% Product Liability ct

A. Manufacturing Defect1. *f causes in+ury, strict lia%ility

". Design Defect1. annot warn later - Must correct(. easona%le person standard

/. &ederal preemptions - "enefits lessened%y Supreme ourt

. Warning Defect1. Post)sale warning re0uired, if later

discoered

(. easona%le person standard


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'%C%C% !arrantiesA. 23press Warranties

1. ontracts

(. Adertisements and %rochures". *mplied Warranties

1. Warranty of merchanta%ility

(. Warranty of fitness for particular purpose/. Waiers and limitations

4. Magnusson)Moss prohi%itions


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(ighly )echnical * Don+t ,o -t lone

5 Multiple state and federal statutes

5 Hundreds of pu%lished and unpu%lishedcourt decisions

5 &ederal and state regulations

5 Sometimes no definitie answers5 When in dou%t, err on the side of

caution


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#trategies for ReducingProducts Liability Risk

Presented "y:Steen A. 6arg


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ProductsL

iability

Ris

k

dvance Planning and .ffort


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(andout Materials5 Primer in Protecting /our Company gainst

Products Liability Risk" published by #omerset

Business 012234%

5 #eller Be5are6 )imebomb Could Be )icking!ithin /our ,ood Faith Business Practices" NewJersey Defense, 7ol% 18" -ssue 1012294%

5 Contractual -ndemnity for Product Manufacturers"New Jersey Defense" 7olume 3:" -ssue 1 039994%


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,eneral Risk Reduction

)echni;ues5 ;ood "usiness Structure Planning

- !imit !ia%ility of


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,ood Practices * Producing a #afe

Product * )hree ,oals

Design a product for which there is no

reasona%le safer alternatie design.5 Manufacture the product as it was designed

and without manufacturing defects.

5 *ncorporate appropriate warnings andinstructions to aoid risks that could not %eeliminated through reasona%le alternatiedesign.


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38 -deas for Producing a Product for

!hich )here is $o Reasonable #aferlternative Design

1> 2sta%lish a products lia%ility losspreention committee.

(> 6eep a%reast of and employ the state

of the art./> Hire e3perienced and knowledgea%le

design personnel to design yourproducts.


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38 -deas for Designing a#afe Product

4> losely monitor competing products.

?> 6eep actie in related industryorgani@ations.

9> losely monitor and comply withapplica%le minimum regulatory andindustry standards.


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38 -deas for Designing a

#afe Product

> orrect design and manufacturing defects as youac0uire knowledge of them for past and future

products.5 *mproe the product for the future.

5 onsider a recall, retrofit, or supplemental warningsfor past products with after)discoered defects.

> onduct safety testing.

7> onsider and design against foreseea%lemisuses of your product.


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#afe Product

18> onsider the enironment in which the

product will operate and design the productto operate safely in that enironment.

11> Design against safety pro%lems created %yworn parts.

1(> Hire a safety consultant to reiew andimproe the product.


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#afe Product

1/> Patent your product innoations.

14> Document your improement effort.5 =each your organi@ation the

importance of the documents they

generate.1?> 'pdate your designs to keep up with

safety innoations.


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,ood Practices * Producing a #afe

Product * )he #econd ,oal

5 Design a product for which there is no

reasona%le safer alternatie design.Manufacture the product as it was designed


5 *ncorporate appropriate warnings andinstructions to aoid risks that could not %eeliminated through reasona%le alternatiedesign.


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8 -deas for Manufacturing a Product

!ithout Manufacturing Defects

1> arefully purchase and inspect raw

materials and component parts.

(> *nstitute a 0uality control program for yourmanufacturing lines and document your

efforts.

/> losely monitor the manufacturing processto aoid recurring manufacturing pro%lems.


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8 -deas for Manufacturing a Product

!ithout Manufacturing Defects4> *nspect completed products for proper operation

and compliance with manufacturing standards,

then document the indiidual results wherepractical.

?> 'se some of the 1? good design practice ideas forthe manufacturing phase as may %e applica%le.

5 &or instance, conduct testing, +oin manufacturinggroups and keep a%reast of the industry.


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,ood Practices < Producing

#afe Product * )he )hird ,oal

5 Design a product for which there is no

reasona%le safer alternatie design.5 Manufacture the product as it was designed


*ncorporate appropriate warnings andinstructions to aoid risks that could not %eeliminated through reasona%le alternatiedesign.


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!hy #o Many

!arnings=


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33 -deas for 'sing ppropriate

!arnings and -nstructions1> 6now the difference %etween, and how to apply, the

terms of art: BDA#;2B, BWA#*#;B, andBA'=*


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!arnings and -nstructions

(> omply with State and &ederal

la%eling regulations and standards.

/> Address the foreseeable audience%y:

5writing at its leel,

5 writing in its languages, and

5 effectiely deliering the warning to it.


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4> Place and distri%ute the warnings properly toensure that the information is deliered in amanner calculated to reach the end user.

?> Document the deliery and use of warningsand training materials and saecontemporaneous copies or samples to %eproduced later if needed.

9> Proide first aid or antidote information whereapplica%le.


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> Proide an instruction manual containing:

a> a safe method for assem%ly of the productE

%> instructions for safe use of the productE

c> a description of the productFs intended uses andits limitationsE

d> warnings of any latent dangers inherent in theproductE


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e> maintenance proceduresE

f> measura%le ad+ustment specifications for safeand proper operationE

g> a recommended fre0uency for maintenanceE and

h> warnings against misuse or modification thatstress the conse0uences of misuse ormodification.


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33 -deas for 'sing ppropriate!arnings and -nstructions

> 2mploy a safety and warningsconsultant where warranted.

7> eiew manuals and warnings with an

e3perienced products lia%ility attorney.


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18> onsider Warranty)elated *ssues:

5 Whether to 'se an 23press Warranty5 !imitations of emedies

5 Disclaimers of Warranty

5 Magnuson)Moss ompliance for onsumerProducts

5 onsumer &raud *ssues

11> Aoid too many warnings - the C"ill%oard2ffect.


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> Risk Reduction -deas for

the #ale of Products

1> Aoid affirmatie misrepresentations of the

capa%ilities of the product.(> Disclose information a%out the product that

the %uyer would deem important to hisknown application.

/> Aoid er%al warranties that are inconsistentwith e3press warranties or disclaimedwarranties.


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Consumer Fraud ct5 Damage caused %y a product as

opposed to economic harm relating topurchase

5 =re%le Damages

5 Attorneys &ees


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Consumer Fraud ct

5 Actiona%le onduct 'nder &A:

5 *nnocent or intentional misrepresentationsin an affirmatie statement

5 *ntentional omissions of material fact

5 *nnocent or intentional iolation ofapplica%le regulation


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Consumer Fraud ct

5 Bosland v. Warnock Dodge

5 Si3 year limitations period

5 #o demand re0uirement

5 lass action pro%lem

5 =icking time %om%


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)echni;ues

5 "usiness Structure Planning

5 Selection of ;ood "usiness Partners5 ;ood Design, Manufacturing, Sales, Distri%ution

and Monitoring Practices

Aoidance of Successor !ia%ility

5 =he Shift of isk to


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!hat is #uccessor Liability=

5 ourt imposed lia%ility of a successor in

interest for the lia%ilities of itspredecessor.

5 =he rationale is that the ac0uiring entity

has %enefited %y the dissolution of thepredecessor, and should coer itsresponsi%ilities.


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#ome Potential #ources of

#uccessor Liability

5 An e3press or implied agreement to assume the predecessorcompanyFs de%ts and o%ligationsE

5 A fraudulent transferE5 A de facto merger or consolidation of entitiesE

5 A purchasing company %ecomes a mere continuation of theselling companyE

5A transfer for no ade0uate considerationE and


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1 )ips for voiding

#uccessor Liability

1. onduct due diligence %efore

purchasing assets from other%usinesses.

(. onsult counsel regarding potentialsuccessor lia%ilities when purchasingassets from other %usinesses.


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)echni;ues

5 "usiness Structure Planning

5 Selection of ;ood "usiness Partners5 ;ood Design, Manufacturing, Sales, Distri%ution

and Monitoring Practices

5 Aoidance of Successor !ia%ility

=he Shift of isk to


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Chain of Distribution Liabilities

Manufacturer

Distributor

Retailer

InjuredParty

Liability

Common La Indemnity

Contractual Indemnity


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'nderlying )hemes for Reducing

Products Liability Risk

5 Strie to Produce a ;ood, State of the

Art ProductE5 Select ;ood "usiness PartnersE

5 Plan Ahead to educe Product elatediskE and

5 'se isk Shifting =echni0ues.


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-nsurance Considerations

Presented "y:harles W. Miller ***


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!argest !awsuits


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Product !ia%ility *nsurance

1. !egal lia%ility

(. Arising out of accidents

/. During the period of insurance


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-nsurance ConsiderationsProduct !ia%ility *nsurance

4. Arising out of any defects in the product?.


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-nsurance Considerationsecall *nsurance

eim%ursement for:

1. ecall e3penses

(. !oss of profit

/. Product reha%ilitation4. risis communications


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Practical Suggestions

1. egular risk assessmentIinsurancereiew

(. #egotiate for the %est coerage

/. Purchase needed insurance coerage


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4. "uy sufficient policy limits

?. 'se %usiness partners coerages, ifpossi%le

9. eiew coerage once it is issued


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Product #ellers?

Liability Concerns and #olutionsRegarding Foreign

Manufacturers@#uppliers

Presented by?

M% Aaren )hompson


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Problems rising from Dealings 5ithForeign Manufacturers@#uppliers?

5 !ess sophisticated safety and 0uality systems

5 !imited goernmental oersight5 $urisdictional *ssues

5 Post)sale pro%lemsIrecalls

5 Difficulty of serice of process

5 !ack of assets in the '.S.

5 Damage to reputation


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Fact Pattern?5 #ew $ersey distri%utor purchases grinding tools from

=aiwanese manufacturer

5 #o formal contract %etween them, +ust purchase orders5 Manufacturer attaches distri%utors logo to the tools in the

factory

5 Manufacturer drafts all instructions and warnings for tools

5 Manufacturer %o3es tools in indiidual packaging withinstructions and warnings


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Fact Pattern?0Continued45 =ools are shipped direct from =aiwan to distri%utor

5 Distri%utor sells tools to customers in original packaging

5 =ools fail to include recommended A#S* and


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Product Liability Causes of ction in

$e5 &ersey?=he manufacturer or sellerof a product shall %e lia%le if the

claimant proes that the product was not reasona%ly fit,suita%le or safe for its intended purpose %ecause it:

a. failed to contain ade0uate warnings, or

%. deiated from the design specifications, formulae, orperformance standards of identical units Ki.e. a

manufacturing flaw>c. was designed in a defectie manner Ki.e. design defect>.

#ew $ersey Products !ia%ility Act, N.J.S.A.(A:?)(


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Product #eller under $e5 &ersey

#tatute Means?Any person who, in the course of a %usiness conducted for thatpurpose:

5 sellsE distri%utesE leasesE installsE prepares or assem%les

5 a manufacturers product according to themanufacturers plan, intention, design, specificationsor formulations, or

5 %lendsE packagesE la%elsE marketsE repairsE maintains or

otherwise is inoled in placing a product in the line ofcommerce.

N.J.S.A.(A:?)


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Limited #tatutory Protection for

Product #ellers in $e5 &ersey?Statute may afford relief from imputed lia%ility if certaincriteria are met:

a> Product seller must certify as to the manufacturerscorrect identity, and

%> Product sellers role with respect to the product wasminimal

N.J.S.A. (A:?)7Ka> and Kd>


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#tatutory Protection Doesn+t pply and

Product #eller is #trictly Liable if?5 the identity of the manufacturer is incorrect, or

5 the manufacturer has no known agents, facility or other

presence within the 'nited States, or5 the manufacturer has no attacha%le assets in the 'nited

States, or

5 the manufacturer has %een ad+udicated as %ankrupt and is

+udgment proof

N.J.S.A.(A:?)7Ka> and Kc>


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-mputed Liability to Domestic

Distributors if Foreign Manufacturer is

'navailable?

a. "y Statute: =en states, in addition to #ew $ersey

%. Model 'niform Product !ia%ility Act

c. estatement K/d> of =orts, L 1


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Product #eller #hall lso be Liable if?Product seller has e3ercised significant control oer theproducts

5 Design5 Manufacture

5 Packaging

5 !a%eling

with respect to the alleged defect or warning which causedthe in+ury, or


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Product #eller #hall lso be Liable if?5 Product seller knew or should hae known of the defect or

had facts aaila%le from which it should hae known of thealleged defect, or

5 Product seller created the defect in the product whichcaused the in+ury.

N.J.S.A. A:?)7Kd>


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Risk Controls for Distributors@Product

#ellers?

,ood -mporter Practices 0draft guidance4

5 6now the foreign company and other companies with whichthey do %usiness

5 'nderstand the products and ulnera%ilities

5 'nderstand the ha@ards that may arise

5 2nsure proper control and monitoring of ha@ards


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#ellers?5 *nitial *nestigation "efore Purchasing

5 eputation of manufacturer

5 &inancial sta%ility of manufacturer

5 uality and safety of product

5 uality Assurance Procedures

5 =esting

5 onformity to specifications5 ompliance with '.S. re0uirements

5 ompliance with industry standards

5 Monitoring throughout life cycle of product


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#ellers?5 Warnings and *nstructions

5 lear and direct

5 Proper language for intended users5 ompliance with industry or regulatory standards

5 Adertising and Sales !iterature

5 Accurate statement of capa%ilities and uses


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#ellers?5 Packaging and Shipping

5 Ade0uate to preent damage

5 ontains warnings and instructions

5 e0uired documents

5 etain shipping records and identification data

5 =ransfer the isk to &oreign Manufacturers through Detailed

ontract Proisions:5 ertifications of safety and 0uality testing Kin 2nglish>

5 Audit procedures

5 Product warranties


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#ellers?5 #otice o%ligations

5 egarding safety issues

5 egarding changes in manufacturing processes5 egarding suppliers or parts K0uality fade issue>

5 ecalls

5 esponsi%ility for recalls5 ecall protocols

5 ooperation lause


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#ellers?

5 *ndemnification proisions5 Strict construction5 onspicuous placement5 Duty to defend5 *dentification of protected parties5 oer negligence of distri%utor5 Assumption of defense5 onsent to settlement


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#ellers?5 *ndemnification proisions Kontd>

5 Surial of duty

5 Assignments

5 Sophisticated parties

5 onsent to +urisdiction

5 *nsurance oerage

5 '.S. %ased insurer5 Distri%utor as additional insured

5 ertificates of insurance

5 =ail coerage


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Pending Legislative #olution * #% 3:2:?&oreign Manufacturers !egal Accounta%ility Act of (887

5 &oreign manufacturers must designate a registered agent inat least one state to accept serice of process

5 &oreign companies must consent to the +urisdiction of thestate or federal court where the registered agent is located

5 State should hae a su%stantial connection to the importation,distri%ution or sale of the products of the foreign manufacturer


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Reporting Recalls 'nder the

Consumer Product #afety-mprovement ct of 122E

Presented "y:Haekyoung Suh


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Consumer Product #afety-mprovement ct of 122E

5 =hird)party testing of childrens products %y certified

la%oratories for certification purposes.5 ertificate of conformance re0uired for all consumer

products.

5 AS=M &79/)8 now mandatory.

5 "an on childrens products containing more than aminimal amount of lead or phalates.

5 Packaging for childrens toys and games must containa la%el or cautionary statement a%out chokingha@ards.


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Consumer Product #afety

Commission

5 egulation

5 Pu%lic *nformation5 ompliance

5 esearch

5 *mport Safety


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#aferProducts%gov

5 Actie %y March 11, (811

5 onsumer Portal5 *ndustry Portal


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ommission eceies

*ncident eport Manufacturer

K?>

ommission ManufacturerPu%lishes K18> esponds to

*ncident eport *ncident eport


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)ime


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$otificationManufacturers, distri%utors, and retailers of a consumerproduct or any other product oer which the ommission has

+urisdiction must notify the ommission immediately uponreceipt of information that reasona%ly supports theconclusion that the product:

5 &ails to comply with an applica%le consumer product safetyrule or oluntary consumer product safety standard.

5 &ails to comply with any other rule, regulation, standard or%an enforced %y the ommission.

5 ontains a defect that could create a su%stantial productha@ard.

5 reates an unreasona%le risk of serious in+ury or death.


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C*f in dou%t, report.

Ceport early and often.


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#trategies For $otification

5 'ather information needed to report to the#ommission.

5 Draft an e(planatory letter and follo" up "ith atelephone call.

5 #ommence a dialogue "ith the #ommission.

5 !e)uest that the #ommission ackno"ledge receipt ofyour company*s notification$ in "riting$ to confirm thedate of notification.


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=


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#trategies For (andling a Recall

5 Develop +re,!ecall +lans.

5 &stablish a !ecall +rotocol.

5 -mplement +ost,!ecall +rocedures.


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Myth N1: *m a small companyE * wont get

caught.


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Myth N(: *d rather pay a small fine than

deal with the headache and cost of a recall.


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Myth N/: * dont sell products across

state lines so * dont need to worry

a%out a federal statute.


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Myth N4: * can handle the pro%lem %y

myself.


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uestion ns5er #ession

=hank you for comingO

Please fill out the ealuation forms and returnthem at the registration ta%le.

Documents

Product Liability Seminar Slides