Tag Archives: product liability insurance

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.

Buying The Assets of A Similiar Business? – You May Also Be Buying The Liabilities!

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When one corporation buys the assets of another similiar corporation, they may also being buying the liabilities of that corporation.  In most cases, the buyer of a firm or corporation’s assets does not inherit the seller’s liabilities.  However, there is an exception when the acquiring corporation is similiar and possibly viewed as a continuation of seller’s operation.  In an instance like this, the buyer may be strictly liable for injuries caused by defects, even if the product was previously manufactured and distributed by the selling corporation.   

A perfect example of this is SFCA, Inc’ purchase of Simplicity, Inc.  SFCA, Inc., an affiliate of Blackstreet Capital Partners, LLC purchased the debt and then purchased the assets through a Foreclosure sale of Simplicity, Inc.   Simplicity, Inc. was a leading juvenile and baby furniture designer, importer and distributor.  SFCA, Inc designs, distributes and imports cribs, changing tables, toddler beds, bassinets, etc. so there is a definite similiarity between SFCA and Simplicity.

Currently, the Attorney General Lisa Madigan of Illinois, has brought a lawsuit against SFCA, Inc. because SFCA acquired the inventory of Simplicity in March of 2008 and continued to sell design-flawed bassinets to retailers, despite knowing the bassinet design was responsible for, at least, one infant death.  Apparently, SFCA refused to participate in the recall because it claimed it was not responsible for the design flaws, since it did not design the defective bassinets.

The million dollar question in my mind is – did SFCA act on the advice of their legal counsel or was this an executive decision by one or more of the officers of the company not to fully participate in the recall of these defective bassinets?   Surely, SFCA’s legal counsel would have made them aware of this legal precedent.  Regardless of who was responsible for this curious decision, I am guessing if SFCA only spends a million dollars to resolve this mess, they will consider themselves fortunate.  Hopefully, SFCA, Inc. carried both product liability and product recall insurance.

Personal Injury Attorneys Use YouTube to Attract Clients

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Although many manufacturers and distributors of products, whether foriegn or domestic, think that they are immune to the lawsuits that arise out of product liability, one trip to youtube.com should change your mind as you see that today’s attorneys may not be “ambulance chasers” they are going high tech to come in contact with this technology world.

While simply searching for an interesting Product Liability story 577 results came through, I only made it through the first 280 of them and approximately 6 of them were actual consumers….the rest Personal Injury Law Firms. They are using commercials, educational seminars or just crazy talking heads like the clip below. These attorneys will stop at nothing to see that they are “on the case” for someone in need. Making sure you that your Product Liability Insurance is adequate in case they come after you is more important now than ever before.