Category Archives: Product liability

Why Naming Multiple Defendants In A Lawsuit Is Common Practice

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When a product liability client is sued, they are usually amazed at how many parties are named in the product liability lawsuit and how many of the named parties have little or no connection to the product that allegedly caused the injury.  

The 3 reasons below will provide a little insight into why there are multiple defendants named when there is a product liability lawsuit.

The first reason there are so many parties named in a product liability lawsuit is  “Alternative Liability Theory”.  This theory allows the plaintiff to shift the burden of proving which of the two or more defendants was responsible for their injury to those defendants in which the plaintiff cannot identify.  Under this theory the plaintiff still has to prove the product caused the injury; however, it relieves the plaintiff of the burden of identifying the source of the product and requires the defendants to prove they were not the source of the injury.  This theory also is a means to get the defendants to identify the guilty parties responsible for the injury in order to avoid being subject to liability themselves.

Of course since product liability law is subject to individual state laws, “Alternative Liability Theory” may not apply in your state.

A second reason so many defendants are often named on product liability lawsuits is because the plaintiff’s attorney could be sued for malpractice, if the attorney fails to name a responsible party to the lawsuit and as a result, the plaintiff misses out on receiving compensation for the injury.  Since legally the plaintiff’s attorney cannot bring the same lawsuit twice, it is the responsibility of the attorney to name all parties that could even remotely have any responsibility for the injury.

The third reason is what makes people so cynical about the legal system.  In the U.S. our Discovery rules are so liberal that attorneys have perfected the art of covering up potential defendants with discovery paperwork.  The costs to comply is so expensive that it is more often in the financial best interest of the defendant’s insurance carrier to provide a settle payment to get release from the lawsuit than to go to the expense of trying to comply with discovery. 

Simply put, by naming as many defendants as possible, the plaintiff’s attorney can increase the amount of money they can collect.  For example, the cost of complying with discovery could potentially cost $10,000; however, by settling for $7,000 the insurance carrier ultimately saves $3,000.  So the next time your insurance carrier decides to settle rather than fight or defend a frivolous product liability lawsuit you will understand that the settlement is based on pure economics.  If you are adamant about defending what you see as a frivolous lawsuit, your insurance carrier may agree to pay you the settlement amount and allow you to hire your own attorney to defend the claim.

An Epic (Kayak) Question For U.S. Companies Outsourcing In China

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Since I was born and raised in Charleston, SC, I was particularly interested in the story about the Charleston-based company’s, Epic Kayaks, lawsuit against its Chinese manufacturer.  

Apparently, Epic Kayaks had outsourced the manufacturing of its kayaks to Fu Yang Flying Eagle Boat Co., Ltd.  Unsatisfied with the project management of the boats being manufactured at Fu Yang Flying Eagle Boat Co., Ltd, Greg Barton, a two-time Olympic gold and bronze medalist and co-owner of Epic Kayaks decided to end their relationship with the manufacturer and move to another new factory in Fuyang.   According to Greg, Flying Eagle refused to release Epic’s molds and equipment unless it received fees and payments that would effectively put Epic Kayaks out of business.

Now for the interesting part – Epic Kayaks has filed a lawsuit in the intermediate level court in Hangzhou, China to gain control of their molds and equipment rather than pay the fees to Flying Eagle.

I think the million dollar question for every U.S. based company that outsources their products in China or every U.S. based company that is considering outsourcing in China is – is there a remote chance of a fair and impartial trial in the Chinese courts against a Chinese manufacturer?

The other question I have is – what role will politics play in the decision by the Chinese courts?  Will the Chinese court view a negative ruling against Epic Kayaks as more bad publicity at a time when Chinese manufacturing business is struggling with an economic downturn and much bad international press regarding overall product quality?

If Epic Kayaks is successful, it will be interesting what impact this will have with U.S. businesses and insurance carriers that provide product liability insurance for Chinese products.  Maybe confidence goes up for U.S. businesses and maybe some bold insurance carrier will decide to take a chance and sue a Chinese manufacturer that was responsible for a large product liability claim or product recall to recover some of the money it had to pay out in claims.

Product Liability/Product Recall and The Cost Of Human Life In The U.S.

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I heard something both comforting and disturbing at the same time the other day, when I was talking with a Product Liability wholesale broker. 

We were talking about a prospect that designed and manufactured big commercial slides for water parks and the type of claims typically associated with this product liability risk. 

The disturbing part of the conversation was that he said many of the big designers and manufactures of high risk products such as waterslides were taking their new designs overseas to sell before bringing them back to the U.S. to sell because the cost of a human life was so much less in other foreign countries than it is in the U.S.   In other words, if the design of the product turns out to be defective and people are injured or die, it is much less expensive to handle claims in other countries than the U.S. 

I guess the comforting part of this conversation was knowing that the products in the U.S. my children are using are much more likely to be safe because, if they are not, companies know that there could be a costly product liability lawsuit or an expensive recall of their products.

While I am happy that my children are safe, I am also a little sad that they do not get the opportunity to learn to dive off a diving board or swing on a tire swing because insurance premiums make it too expensive to provide such activities or products.

Obama And The Preemptive Defense For Medical Products

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Many of bloggers and journalist I read are convinced that Obama’s administration is out to completely strike down preemption as an effective defense by medical manufacturers.  While the Wyeth v. Levine preemption case was a big win for the U.S. trial lawyers and a big set back for the Bush Administration’s attempt to override a State’s rights concerning product liability law, I am not so sure that Obama will not support preemption as a defense for medical manufacturers in the future.

Past history shows that while in the Senate, Obama, went against party lines and U.S. trial lawyers and voted for tort reform.  So it is not a slam-dunk that he will look to completely do away preemption as a viable defense.

The bigger issue with preemptive defense for medical products is the FDA seems to ignore the risk/utility analysis  so commonly used in product liability lawsuits to determine if another product on the market at the same time as the alleged defective product would perform the same functions without the alleged defect.   It appears that the FDA routinely approves medical products that have similar uses as existing medical products on the market, but have more side effects without providing superior results.

This leads many to believe that the FDA is not a truly independent agency and that they may be coming under the influence of the big medical and drug companies.  As long as this continues to happen there appears to be no choice but to allow product liability lawsuits to determine if the injury in question could have been avoided.

If preemption is going to be used as an effective product liability defense, the FDA is going to have to tighten its approval guidelines so they have more credibility within the courts.

RV Manufacturer Sued For Failure to Warn

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The owner-operator of a new recreational vehicle filed suit against the manufacturer after the RV crashed, resulting in injuries. The owner said he was driving on an expressway and put the vehicle in “drive” so he could get out of the driver’s seat to walk to the rear of the RV to get coffee.  The driverless vehicle ran off the road and overturned.  The owner of the vehicle claimed in his suit that the manufacturer failed to provide a warning that automatic drive didn’t mean the RV could drive “automatically.”

Source:  Liable to Laugh: An American Specialty Companies Book Copyright 2004

Don’t Be Afraid To Ask To Be Named As Additional Insured

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Do you think you are too small to ask your third party manufacturer or parts supplier to name you as an Additional Insured on their product liability policy? 

The fact is most legitimate businesses have anticipated this request and sees it as a minimum standard for good business practices.  It is common for most manufactures and suppliers to have a blanket vendors endorsement on their product liability insurance policy so they can name their clients as Additional Insured.

If your supplier or third party manufacture will not name you as Additional Insured on their product liability insurance policy and provide you with a Certificate of Insurance showing you as Additional Insured, you should consider this a “red flag” that your supplier or manufacture does not have a Product Liability Insurance Policy.

Remember, you are most likely buying the product based on the word or advertising of the supplier or manufacturer.  If they truly believe in the safety of their products or manufacturing process, they should not have any problem naming you as an Additional Insured on their Product Liability Insurance Policy.

If your manufacturer or supplier will not name you as Additional Insured, consider finding another manufacturer or supplier.

Understanding Strict Liability

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Many of the prospects that contact me have a difficult time grasping the concept of Strict Liability and how it impacts their business and product liability insurance.

First of all, strict liability requires no burden of proof that negligence exists. It only has to be proven that the product was the approximate cause of the bodily injury or property damage and that the product defect was a result of a design defect, manufacturing defect, improper warning or improper instruction.   Secondly, when a plaintiff brings a product liability lawsuit, they are not required to make a choice between design defect, manufacturing defect or failure to warn defect and may elect to use all theories to support their case.

Prior to 1963, injured parties had the burden of proof that negligence existed in order to be compensated for their injuries.  After 1963, due to the Strict Liability doctrine, the costs of injuries shifted to those who market the products – the manufacture, wholesaler, distributor and retailers. 

Basically, the logic behind Strict Liability is that the manufacturers, distributors and retailers of a product that causes bodily injury or property damage are more responsible than the consumer that was injured or suffered a loss and are in a better position financially to accept the burden of making the consumer whole again.

Does The Peanut Corporation of America Have Product Liability Insurance?

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The technical answer to the question, does the Peanut Corporation of America have product liability insurance?’ is “yes”; however, the real answer may be “no”.

Of course the Peanut Corporation of America has a product liability insurance policy, but it may not provide any coverage because of the “intentional acts exclusion” in the policy.

It appears that via email the company president, Stewart Parnell, was informed by the plant manager, Sammy Lightsey, of a positive Salmonella test and despite of that warning instructed the plant manager to ship the products.

Typically, a commercial general liability policy states that the policy does not cover “bodily injury” or “property damage” expected or intended from the standpoint of the insured.  It could be easily argued that Stewart Parnell and Sammy Lightsey could have reasonably expected consumers to get sick and possibly die because of the positive Salmonella test and chose to ignore the positive test and warnings for profit.

The Peanut Corporation of America’s insurance carrier, Hartford Casualty Insurance Company, will be within their rights, in my opinion, to deny the claim. However, based on an inside source at The Hartford, it is more likely The Hartford will pay the $10,000,000 in policy aggregate limits and wash their hands of the ugly mess.

From The Hartford’s viewpoint, even if they could successfully deny product liability coverage based on the “intentional acts exclusion”, they would still pay out the full $10,000,000 in policy limits sooner or later.  All the insurance carriers of the manufacturers such as Cliff Bar and Hershey that used Peanut Corporation of America’s products in their finished products and were sued, as a result, would sue The Hartford to recover their losses.

All You Need To Know About The 2008 Peanut Butter Recall

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  • 600 people sickened by peanut butter products from the Peanut Corporation of America;
  • 8 dead;
  • 1800 products recalled
  • When company president, Stewart Parnell, and manager of the plant, Sammy Lightsey, were asked by congress if they would eat any of their own products, they pleaded the 5th Amendment right so as not to incriminate themselves;
  • Employees of the company said they would not allow their children to eat any of products associated with the plant;
  • The Georgia Dept. of Agriculture, while stating their goal was 2 inspections per year, conducted no inspections of the plant in over a year;
  • Email by the plant manager to the company president informed the president of positive salmonella test;
  • After being informed of positive Salmonella test, company president, Stewart Parnell, instructed plant manager to ship the products.

Obviously, the saying “do unto others as you would have them do unto you” never crossed the company president’s or the plant manager’s mind.

Before the dust on this tragedy has settled the direct and indirect costs associated with this peanut butter products recall will reach into the billions of dollars.  I mention this because apparently, to the officers and employees of the Peanut Corporation of America, human life only has value if it is your’s or one of your immediate family members.

10 Ways A Non-Manufacturer Can Be Held Liable As The Manufacturer

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When can a retailer, assembler or distributor be viewed as the manufacturer in courts for product liability claims?

Most retailers, assemblers and distributors of products are not aware of real degree of liability for which they are responsible.  Below are 10 ways you may be ultimately responsible for a defective product even though another manufactured the product:

  1. You rebuild or remanufacture a product for resale;
  2. You exercise control over the manufacturer such as providing product specifications;
  3. You are the successor of a manufacture of an injury-causing product;
  4. You are an employer and you modified a product or manufactured a product that injured your employee;
  5. You represent yourself as the manufacture of the product to the public;
  6. You apply your name, tradename or trademark to the product;
  7. Your advertising leads the public to believe you are the manufacture;
  8. Your sales methods leads the public to believe you are the manufacture;
  9. The seller of the product is a subsidiary or agent of the manufacture and the manufacture exercises control over the seller;
  10. You are the importer and distributor of a foreign product.

It is important that if a manufacturer makes a product for you that you clearly identify the manufacturer on a label or other markings of the product and you distinguish yourself as a distributor by “distributed by” or “made for” wording on the label or product.