Tag Archives: Product liability

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

Posted on by

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.

RV Manufacturer Sued For Failure to Warn

Posted on by

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

Understanding Strict Liability

Posted on by

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?

Posted on by

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.

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

Posted on by

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.

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

Posted on by

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.

Additional Insured On A Chinese Product Liability Insurance Policy? – Whoop Tee Doo!

Posted on by

If you are an importer of Chinese products and have been told by the Chinese manufacturer or distributor that you are covered by their product liability insurance policy, I recommend you read Linda Stamato’s article below.  After reading this article, you will have a better understanding of why your U.S. insurance carrier does not provide discounted rates on your U.S. product liability policy when you can provide proof you are Additional Insured on the Chinese manufactures or distributitors insurance policy.  Simply put, nobody with any experience in the product liability field has any confidence that any type of restitution be found in the Chinese courts, even if the case is an obvious slam dunk of manufacturing defect or design defect.

As reported by Linda Stamato of NJ.com: In the United States, we have no end of attacks on product liability litigation, consumer protection laws and class action lawsuits. (A visit to Americans for Tort Reform provides information and perspective on these efforts.) As this group and others question the “excesses” of lawsuits in compensating the injured and doubt their efficacy in bolstering product quality, consider what is taking place in China……  Read the Full Story on Toxic milk and poisoned babies: Product liability limits in China

Confidence in Chinese products is so low that I predict that more retailers and U.S manufactures that use Chinese parts in their finished products are going to start requiring the U.S. Importers and Distributors of these products to start carrying Product Recall Insurance with a third party endorsement that will cover the expenses of any third party (retailer) for the recall of any product that incorporates your product including the cost to repair or replace such product.

Product Liability Insurance Quote Tips

Posted on by

Since we specialize in start-up businesses, I must field on average 50 calls per week from manufacturers, distributors and importers looking a product liability insurance quote.

When obtaining a product liability insurance quote, it is to your benefit to consider the following:

  1. More information about your products is always better than too little information.   When you submit a product liability application, it is to your benefit to provide as much information about the products you want to insure to the underwriter so the underwriter can feel good about their understanding of your products and business.  This includes websites, product brochures, labels with list of ingredients, independent test reviews and certifications.  If you do not provide full and complete disclosure, the underwriter may think you are trying to hide something and may refuse to consider your application or if they do provide you a product liability insurance quote, error on the side of caution and charge you a higher rate and premium.
  2. Include all insurance contract requirements with your product liability insurance application.  It is not uncommon for businesses to purchase insurance and find out later that they either do not have the correct limits of liability or they needed to have purchased an occurrence policy instead of the cheaper claims-made policy they purchased.  Including your insurance contract requirements with your application will help your insurance agent provide you with the correct quotes the first time and therefore, not waste your time having to get new quotes or the unnecessary expense of having to cancel your old policy and purchase a new policy.
  3. Take time to understand the difference between Claims-Made and Occurrence policies before getting your product liability insurance quote.  Start-up businesses, typically, want the cheapest insurance they can buy (claims-made) and often incorrectly assume they can upgrade their insurance once they become more established.  Because of the retroactive date associated with a claims-made policy, it can sometimes be impossible to convert coverage to an occurrence policy without losing coverage for all the years you owned a claims-made policy. To better understand the differences between claims-made and occurrence policies go to our website, Product Liability Insurance – Occurrence Vs. Claims Made
  4. Know if your agent specializes in Product Liability.  Simply put, an agency or brokerage that has placed millions of dollars of business in product liability insurance is going to have better relationships and more power to get things done within the product liability insurance industry and is in a better position to negotiate a competitive rate and premium on your behalf than the general agency that tries to be everything to everybody. 
  5. Be truthful on your product liability insurance application.  If you choose to lie or do not tell the truth on your application, you are setting yourself up to potentially have your claim denied should you be involved in a lawsuit.  When you file a claim, one of the first things your claims adjuster in going to do is review your original application for material misrepresentations.  A material misrepresentation is any statement which if answered correctly, would have been a reason for the insurance carrier to deny the application under its underwriting criteria.  Any material misrepresentation on your product liability application could result in your claim being denied and as result no insurance money to handle your legal defense, settlement or adverse jury verdict.

Personal Injury Attorneys Use YouTube to Attract Clients

Posted on by

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.

When Should You Buy Intellectual Property Abatement Insurance?

Posted on by

On average, we get about three calls per month from inventors, patent holders and current product liability clients that are looking for insurance that would allow them to sue or protect their rights from those individuals or businesses that steal their patents or intellectual property. 

 Intellectual Property Abatement Insurance covers litigation expenses incurred in enforcing the insured’s intellectual property (IP) against infringers up to the policy limit (typically $100,000 to $3,000,000).

My advice for those looking to purchase Intellectual Property Abatement Insurance is always the same – only insure those patents that have the potential to make you very rich.   While intellectual abatement insurance does potentially provide you with financial resources that you otherwise would not have access too, it also requires that you pay a large part of the expenses to prosecute the offenders of your intellectual property rights.  Typically, the deductible is 2% or more and co-insurance is 20% or higher.  In other words, if your insurance carrier spent $100,000 going after a company that infringed on your intellectual property or patent in court, you are going to be responsible for slightly more than $20,000 of this expense.

From the insurance carrier’s perspective, they puposely want you to have some skin in the game and share a large portion of the expense because they want you to be thoughtful about choosing cases that are winnable and not seeing the insurance carrier as a deep pocket to sue every business that may have a similar patent or products. 

In summary, if your product has potential to earn millions of dollars of future revenues, Intellectual Property Abatement Insurance is a small price to pay to protect your interest.