Presented by: Joe Bails, Jackie Flowers, Scott Harden Products Liability Presented by: Joe Bails, Jackie Flowers, Scott Harden

Let’s Play: “Name that Famous Product Liability Case” “BBQ on wheels”? Ford Pinto “scalded crotch”? McDonald’s coffee “rollovers”? Firestone tires Can you think of others?

Products Liability Facts Lawsuits are at record numbers Jury verdicts for injured parties continues to rise Judgment/settlement values keep rising Fifty million product accidents/year Annual cost of $50,000,000,000 (fifty billion)

Products Liability Causes Reasons for product injuries: Behavior/knowledge of product user Environment where the product is used Product design and construction Which of these can an organization control? How?

Reasons Manufacturers are Liable Manufacturers are in best position to know: Safest designs Safest materials Best construction methods Safest modes of use Products are more complex than ever Consumers expect products to be designed with safety as a priority

Products Liability History Ancient times, producers of grain were liable, sampling used to determine quality 14th century, sampling and government seals used for verification, economic damages awarded 18th century caveat emptor, “let the buyer beware”, purchaser was responsible for themselves legal doctrine of privity of contract, could not directly sue the manufacturer 1916 MacPherson vs. Buick Motor Co. began the end of privity of contract (similar to Firestone lawsuit) 1972, Consumer Product Safety Act (CPSA)

Consumer Product Safety Act Protect public against unreasonable risk of injury Assists consumers in evaluating safety of products Develop uniform safety standards Research/investigate causes and prevention of product safety issues Maintains injury information clearinghouse All products used in or around home or school covered by CPSA

Items not covered by CPSA but by other Agencies Cars – NHTSA – National Highway Traffic Safety Administrstion Boats – U.S. Coast Guard Airplanes – NTSB – National Transporation Safety Board Food, Drugs, Cosmetics, Tobacco – FDA - U.S. Food and Drug Administration Poisons – EPA – U.S. Environmental Protection Agency

CPSA helps protect against things like this! Video clip from Consumer Product Safet commission web site: http://www.cpsc.gov/mpeg.html

Product Liability Law Involves tort law of negligence or strict liability and contract law of sales or warranty resulting from: Defect in design or manufacturing Improper service Breach of warranty Negligence in marketing due to improper directions, warnings, or advertising Plaintiff must prove causation – 51% likely that product caused the injury

Negligence “Classic” theory of products liability Manufacturer owes a duty of care to the consumer when designing and constructing products Consumer must prove manufacturer was careless or lax in its duty and thus produced a defective product

Doctrine of Strict Liability One who sells a product in defective condition is liable for harm caused to user or user’s property Focus on defective product not careless manufacturer Injured party must prove: The product was defective and unreasonably dangerous The defect was present at the time of manufacture The defect caused the injury

Warranties Controlled by Uniform Commercial Code Two types: Express warranty – material statement made voluntarily by manufacturer to induce sales Implied warranty – product is generally fit for the purpose for which it was designed, implied by law and part of every sales contract

Express or Implied You Decide! Video clip from Consumer Product Safet commission web site: http://www.cpsc.gov/mpeg.html

Products Liability Defense Comparative negligence – apportions fault and damages to injured due to negligent use of product, ex. 30% user fault, 70% manufacturer fault, pays 70% of damages Assumption of risk – injured consumer assumed the risk of injury, ex. Use of chainsaw, involves assumed risk Misuse – injured misused product, ex. Using chair as a ladder to change lightbulb Statutes of Repose – useful life defense, usually 8, 10 or 12 years, ex. 20 year old drop cord catches fire

Defense Aids Technical experts Records pertaining to: Product design Test and inspection results Customer complaints Sales history Sales literature Use of Quality concepts Products and systems based on government or industry standards

What is there to lose? Monetary awards for: medical expenses loss of earning capacity mental pain punitive damages Legal expenses Bad publicity Competitiveness of product in marketplace Higher insurance premiums Cost of product recall Damage to reputation Cost of production redesign Cost of quality efforts for prevention or appraisal

Punitive Damages Example Ford Motor Company Ford Pinto Pictures from MotherJones.com web site: http://www.motherjones.com/news/feature/1977/09/dowie.html

How to Prevent Products Liability Lawsuits Organization: Formal product safety committee Safety Engineer or outside consultant as committee chair Members from legal, design, manufacturing, marketing, quality areas Everyone must be made aware of committee and chairperson Direct access to senior management What Quality Principle does this illustrate? LEADERSHIP

How to Prevent Products Liability Lawsuits Education All employees must be made aware of the importance of product safety Initial use of purchased materials, training sessions, and printed materials New or transferred employees need to be exposed to same educational effort Employees need to know how to handle first notifications of product incidents What Quality Principle does this illustrate? EMPLOYEE INVOLVEMENT

How to Prevent Products Liability Lawsuits New Product Review First and least expensive chance to correct product Safety of product for consumer is paramount in review process Adopt safety design techniques ( listed on page 416) Include written description of product by designer Product review team with no preconceived notions about the use of the product Review customer requirements and customer’s known use of the product Design control is a requirement of ISO 9000 What Quality Principle does this illustrate? CUSTOMER SATISFACTION, EMPLOYEE INVOLVEMENT, CONTINUOUS IMPROVEMENT, PERFORMANCE MEASURES

How to Prevent Products Liability Lawsuits Initial Production Review Check for defects in first production items not found in prototype Limited production run for inherently hazardous products to gage risk exposure to customers Involve more people in this review than design review Evaluates manufacturing plan (elements listed on page 418) Should evaluate product safety for potential liability exposure Process control is a requirement of ISO 9000 What Quality Principle does this illustrate? CUSTOMER SATISFACTION, EMPLOYEE INVOLVEMENT, CONTINUOUS IMPROVEMENT, PERFORMANCE MEASURES

How to Prevent Products Liability Lawsuits Periodic Production Audits Verify effectiveness of quality control system Performed on recently manufactured products that have been through the distribution systems and in customer use for substantial period of time Inspection and testing is based on customer use Feedback is sent to the product safety committee Production audits are a requirement of ISO 9000 What Quality Principle does this illustrate? PERFORMANCE MEASURES

How to Prevent Products Liability Lawsuits Control of Warranties, Advertisements, Agreements Review warranty, advertising literature, dealer agreements, catalogs, and technical publications Do not use the word “safe” or “ensures safety” Legal counsel should analyze materials Other items listed on page 419 Feedback is sent to the product safety committee Production audits are a requirement of ISO 9000 What Quality Principle does this illustrate? Trick question! None directly, but perhaps it could be PERFORMANCE MEASURES

How to Prevent Products Liability Lawsuits Warning Labels and Instructions Largest cause of manufacturer’s negligence due to inadequate or nonexistent warnings A product is not defective when it has a warning that when followed makes the product safe to use American National Standards Institute issues guidelines for warning labels Distinction between warnings and instructions, both must be provided Warnings should not be overdone

Real Product Warning Labels Try to name the product "For use by trained personnel only." On a can of air freshener "For external use only!" On a curling iron. "For indoor or outdoor use only." On a string of Christmas lights "Do not use orally." On a toilet bowl cleaning brush From Things People Said, Warning Labels web site: http://rinkworks.com/said/warnings.shtml

Real Product Warning Labels Try to name the product "Fragile. Do not drop." Posted on a Boeing 757 "Do not iron clothes on body." On packaging for a Rowenta iron "Do not use intimately." On a tube of deodorant "Wearing of this garment does not enable you to fly." On a child sized Superman costume. From Things People Said, Warning Labels web site: http://rinkworks.com/said/warnings.shtml

Group Exercise Get into 3 groups. Write applicable product warning labels for items given to your group. Each group will present their items and their labels to the class. Make up at least one obscure and invalid warning label like those we just saw for one of your items.

How to Prevent Products Liability Lawsuits Subrogation (to put in the place of another) Refers to raw materials and components Suppliers need to follow same safety criteria Should visit suppliers and audit their operation Communication concerning defective materials from supplier should be made in writing Purchasing oversight is a requirement of ISO 9000 What Quality Principle does this illustrate? Supplier Partnership

How to Prevent Products Liability Lawsuits Complaints and Claims – corrective action required by ISO 9000 Retention of Records and Document Control – record retention required by ISO 9000 ISO 9000 Documents – failure to have quality plan may be proof of negligence Product Recall Plan – traceability is a required by ISO 9000

How to Prevent Products Liability Lawsuits Risk Criteria – focus preventive efforts where most needed Standards – employees need to be involved in development of standards Audits of prevention program, requirement of ISO 9000 Customer Service – must report product problems and any misuse Redress – handling of complaints, returns, claims fairly with the customer

Questions?