ICPHSO: U.S. and Canadian Product Liability and Safety Regulatory Risks Kenneth Ross Bowman and Brooke LLP October 27, 2009

2 Product Liability Liability of a manufacturer or someone else in the chain of production and distribution for personal injury, property damage, or possibly economic loss caused by the sale or use of a product.

3 U.S. and Canadian Legal Requirements Common law Statutory law (laws, regulations) Mandatory and voluntary standards State of the art

4 Plaintiff’s Legal Theories Tort theories Negligence Strict Liability Gross Negligence Misrepresentation or Fraud Contract theories Breach of Warranty Breach of Contract

5 Negligence Failure of a manufacturer or anyone in the chain of production or distribution to exercise reasonable care in design, manufacture, testing, and servicing as well as warning of dangers in its products and providing adequate instructions.

6 Strict Liability Defective when sold No substantial change Unreasonably dangerous Harm and person harmed foreseeable Defect caused injury

7 Plaintiff’s Legal Theories Manufacturing defects Design defects Defects in warnings and instructions Marketing defects

8 Contract and Warranty Breach of contract Breach of warranty Express warranties Implied warranties

9 Manufacturing Defect Product departs from its intended design Physically flawed, damaged, or incorrectly assembled True strict liability

10 Defective Design Definition: Defective if reasonably foreseeable risks could have been reduced by adoption of a reasonable alternative design at reasonable cost Test: Risk-utility balancing -- compares alternative design and current product design Conformance with state of the art and standards not absolute defense

11 Defects in Warnings Definition: Defective if reasonably foreseeable risks could have been reduced by providing reasonable instructions or warnings and omission renders product not reasonably safe Not required for obvious hazards

12 Laws and Regulations A product is defective if it does not comply with an applicable product safety statute or administrative regulation -- if there is causation Compliance is admissible but may not be determinative (i.e., may not be a defense)

13 Voluntary Standards Compliance with standards is generally not required; however, Certain laws may require compliance Failure to comply may have to be explained away in court Could be proof of state of the art May need to exceed standards

14 Product Certifications (UL, CSA, ETL, etc.) Not an absolute defense in a product liability case Considered a minimum like standards Standard to be certified to may not cover all aspects of product safety Certifying agency may not properly test to certification standards

15 “State of the Art” Product’s design conforms to industry custom; Design reflects the safest and most advanced technology developed and in commercial use; or Design reflects technology at the cutting edge of scientific knowledge and testing

16 Post-sale duties Potential penalties have increased Legal requirements to monitor, report and undertake remedial programs have increased in U.S. and elsewhere Plaintiff’s attorneys are beginning to understand and will attack manufacturer for failure to comply

17 U.S. Common Law Post-sale warning is to be provided if: substantial risk of harm users can be identified and can reasonably be assumed to be unaware of risk can be effectively communicated to those at risk and acted upon; and risk of harm is sufficiently great to justify burden No duty to recall or retrofit

18 Regulatory Requirements U.S. CPSC, NHTSA, FDA, USDA Canada C-6 Health Canada EU General Product Safety Directive

19 CPSIA Many more standards and regulations to comply with More reporting More recalls and public notice Public database Increased fines Possible state law enforcement Possible imprisonment

20 Duty to Report to CPSC If product: fails to meet a consumer product safety standard or banning regulation, contains a defect which could create a substantial product hazard to consumers, or creates an unreasonable risk of serious injury or death

21 C-6 (CCPSA) Prohibition against manufacture, importation, sale Duty to report Disclosing confidential information Mandatory recalls Fines Imprisonment

22 Conclusion More reporting More recalls More fines More litigation, individual and class action More cross-border cooperation in litigation and regulatory compliance

23 For more information