Product Liability Insurance Blog » Defense Cost

State To State Variability – Statute of Repose

Paul — Tue, 29 Dec 2009 16:14:04 +0000

A common theme in many of my blogs is the impact individual state laws or statutes can have on the outcome of a product liability lawsuit. It is, in my opinion, possible to take the exact set of circumstances of a product liability lawsuit and have different outcomes in different states. Product liability laws or statutes are created by state legislators and can be very different from state to state. While there have been attempts to create federal preemption for medical products, all too often state laws continue to prevail over the federal preemptive defense.

One of the state laws that can have a major impact on the outcome of a product liability lawsuit is the Statute of Repose. The Statute of Repose prevents product liability lawsuits against the manufactures, importers, designers and distributors of products based on the age of the product. However, only 19 of the 50 states have Statute of Repose laws to protect businesses from product liability lawsuits. Most of the states that have Statute of Repose laws limit product liability lawsuits somewhere between 5 to 12 years after the sale of a product. Two states, Arizona and Rhode Island, have found Statutes of Repose laws for products unconstitutional.

One of the industries that is very familiar with Statute of Repose laws and the impact they can have on a product liability lawsuit is the Tree Stand industry. For example, if a kid where to die or become a quadriplegic in a state with a 10 year Statute of Repose law and the age of the tree stand was 11 years from the date of sale, the manufacture, designer and sellers of the tree stand could be protected from a product liability lawsuit because of the 10 year deadline was exceeded. However, in another state that did not have a Statute of Repose law, the manufacture, designer and sellers of the tree stand could find themselves named as defendants in a product liability lawsuit and, at the very least, incur discovery and settlement costs and, at the worst, large monetary judgments by a sympathetic jury.

The Electronic Discovery Trap

Paul — Tue, 29 Sep 2009 20:05:33 +0000

In a recent blog, “Why Naming Multiple Defendents In A Lawsuit Is Common Practice”, I talked about the liberal discovery rules in the U.S. and cost to comply when named as a defendent in a product liability lawsuit.

I wanted to expand on this because so many of the businesses that contact us have never been through a lawsuit and do not have any concept of how extremely expensive it is to comply with discovery in today’s electronic and technological world.

Often overlooked in today’s modern world is the fact that plaintiff attornies have spent the last 20 years perfecting the art of electronic discovery and how to use it against the defendents as a way of making them spend money.

Did you know that defendents are required to preserve every email? If the emails are in an old system, defendents are required to search out and discover emails in old systems that are no longer supported and make this information available to the plaintiffs in whatever format they want to read it. Not only is it expensive to ferret out the emails, but what if the emails contain sensitive materials that are protected by HIPPA privacy laws? The cost to comply goes up.

I think you get the picture. Even if you have no liability in the lawsuit, our liberal discovery rules in the U.S. allow the plaintiff’s attorney to force you to spend a great deal of money to comply with discovery. The higher the costs to you the greater the asking price by the plaintiff’s attorney to reach a settlement.

Defense Costs Inside or Outside The Limits of Liability?

Paul — Thu, 03 Sep 2009 19:15:27 +0000

When buying a surplus lines product liability insurance policy, you are often presented with product liability quotes that indicate the defense costs are inside the limits of liability. If you read your proposal or quotes carefully, you will often see the option of adding defense costs outside the limits of liability for an additional 10% premium charge.

Why is this important? Before I can answer this it is important that you first understand what it means to have defense costs inside or outside the limits of liability. If your defense costs are inside the limits of liability, any lawyer fees, investigation expenses, defense expenses and appeal expenses erode your limits of liability. In other words, if all these expenses add up to $500,000 and you have a $1,000,000 per occurrence limit on your product liability policy, you only have $500,000 left to pay a judgment or settlement. If your defense costs are outside your limits of liability, lawyer fees, investigation expenses, defense and and appeal expenses of a claim will not reduce your liability limits.

This may not appear to be a big deal on the surface, but if you had a bad batch of defectively manufactured products, you may find yourself faced with multiple claims. Recent data indicates the national average cost to defend a product liability claim is $876,000. A $1,000,000 per occurrence with a $2,000,000 aggregate liability limit could be exhausted very quickly and you could find your business with no limits left to pay the judgment or settlement of additional claims very quickly.

Once the liability limits have been exhausted, your insurance carrier no longer has any obligation to pay any claim, judgment or claim expense or to defend or continue to defend your company.

So when purchasing or renewing your product liability policy, review it carefully and if your defense costs are within the limits of liability, think very carefully about spending an additional 10% to add your defense cost outside the limits of liability. It could mean the difference between success and failure as a business.