• Child Craft (out of business)
• Delta Enterprise Corp of New York, NY
• Evenflo of Miamisburg, OH
• Jardine Enterprises of Taipei, Taiwan
• LaJobi of Cranbury, N.J.
• Million Dollar Baby of Montebello, Calif.
• Simmons Juvenile Products, Inc. of New London, Wis.
   

Apparently, drop down cribs have a long history of problems and are known to be less structurally sound than four fixed side cribs.  In the last 5 years, more than 9 million drop down cribs have been recalled from the market.  They are also more suscetible to age related wear and tear and incorrect assembly than the fixed side cribs.

If you want to know more about crib safety, go to JPMA Crib Safety.

Over the last ten years Graco and Simplicity has distinguished itself as one of the most embattled and recalled company’s in the history of the United States, yet it seems to be able to continue to live up to it’s business model of delivering inexpensive baby and children’s products.  During this time, products such as cribs (suffocation), strollers (finger amputations), high chairs (falls), car seats (choking), toddler beds, swings, walkers, baby carriers, bassinets and toys have been recalled by the millions.  The cost alone to handle all the recalls and product liability lawsuits has to have reached into the hundreds of millions of dollars over the past ten years.  I guess the Civil Penalty imposed by the CPSC of $4M for not reporting known product defects in a timely manner must have seemed like a small slap on the wrist.

I have to believe somewhere some college professor is teaching a class based on the business model of Graco.  You have to give Graco their props.  Despite it’s name being negatively being associated with baby and children’s injuries and deaths and spending hundreds of millions in fines, product recalls and product liability lawsuits they appear to not only survive, but to thrive and remain profitable.

 Statute of Limitations laws place a time limit on how long an injured party has to file a product liability lawsuit, after the time of the injury.  After the time limit has expired, an injured party loses the right to file a product liability lawsuit, unless a legal exception applies. For most states, a product liability claim must be filed within 2 to 4 years, after the injury.

 While the Statute of Limitations appears to have less variability from state to state than Joint And Several Liability and Statute of Repose, the real variability lies primarily with the legal exceptions.  When legal exceptions exist, it allows the Statute of Limitations to stop running. Typical legal exceptions are when a victim was a minor or mentally incompetent at the time of the injury or the defendant is in bankruptcy.  For example, in the state of New York, a minor has 3 years after their 18^th Birthday to file a product liability lawsuit. 

Claims-Made Policies and Children’s Products

Because most states allow, at least, until the eighteenth birthday of a victim to bring a product liability lawsuit, claims-made policies are not a good fit for businesses that manufacture, import or distribute children’s products. 

To state it as simply as possible, once a claims-made policy is cancelled or non-renewed, there is no product liability coverage for any prior injuries or incidences involving your products.  To have a claim covered by a claims-made policy two things must exist – you must have the injury and the claim during the policy period.  In other words, you must keep renewing your claims-made policy or, if you switch policies, you must have the new insurance carrier to endorse your new policy to include the retro-date (original effective date of our first claims-made policy) of your first insurance policy.

The other issue for children’s businesses is the large retailers of children’s products are all too aware of the legal exception for minors that stop the statute of limitations from running.  As a result, most of the large retailers will require providers of children’s products to have an occurrence-based policy.  Unlike a claims-made policy, an occurrence-based policy only requires an incident or injury to provide coverage.  So all prior incidences or injuries to the cancellation or non-renewal of an occurrence-based policy would still be covered by the insurance company.

In summary, while it is tempting to purchase a claims-made policy because premiums can be 30 to 40% less than an occurrence-based policy, most of the major retailers are aware of the legal exception for minors and, as a result, will contractually require their vendors to have an occurrence-based policy in order to do business.  Also, from a pure risk management point of view, the owners, principles and stockholders of a children’s business should be able to sleep better at night knowing the occurrence-based policy will still provide product liability coverage for incidinces or injuries prior to the policy being cancelled or non-renewed.

The real question on the minds of most small businesses involved with children’s products is – will the new chair of the Consumer Product Safety Commission, Inez Tenenbaum, bring relief to small business or will she simply be the enforcer of the new Consumer Product Safety Improvement Act (CPSIA) of 2008 and force most out of business because of the high cost of legal compliance?

The first thing Ms. Tenenbaum will need to do is clarify the agency’s position regarding testing, labeling, tracking and it’s current ban on the sale of existing inventories.  According to the CPSIA of 2008 all children’s products will have to be tested for safety by an independent testing lab certified by the CPSC.  Warning Labels will now need to be on the product, packaging, Internet sites and catalogs and comply with a specific layout, type, language, color and placement.  Tracking must be on each product and show source of product, date manufactured and batch or run number.

If Ms. Tenenbaum simply chooses to be the enforcer of the CPSIA of 2008, most small children’s importers and manufacturers will be forced out of business because they are barely surviving due to current recession and the high cost of legal compliance will, likely, be the final nail in the coffin. 

Those choosing to continue to import and manufacture children’s products will not have the luxury of easing into the market place.  They will need deep pockets to support their efforts and a marketing plan that will have be aggressive so they can sell enough products to offset the increased investment cost.