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.

We know from my previous blog, “Why Naming Multiple Defendants In A Lawsuit Is Common Practice”, that it is typical for the plaintiff’s attorney to name as many defendants as possible, when there is a product liability lawsuit.   However, what may surprise you is that even if you have only marginal ties to the product that is responsible for the product liability lawsuit you could potentially be responsible for paying the lions share of the damages or even paying all of it. 

How can this be? This is not fare! What kind of law would allow this to happen?

Joint and Several Liability was created to make sure the injured party or plaintiff was able to be made whole, even if one or more of the defendants are unable pay their share of the product liability monetary damages.  Many of the critics of Joint and Several Liability refer to this approach as the “deep pocket” rule because of the potential of a product liability lawsuit becoming a search for the “deepest pockets”.

Over time tort reform efforts have led to many states limiting the applicability of pure joint and several liability.  Currently states are using one of the following three approaches when distributing financial liability of defendants:

1. Pure Joint/Several Liability – Each defendant in a product liability lawsuit is responsible for the entire amount of the damages, regardless of amount responsibility or liability each defendant had.  Currently, 16% of states use Pure Joint and Several Liability, including my fine state, South Carolina.
2. Pure Several Liability – Each defandent is only liable for their assigned portion of the damages, based on their percentage of responsibility or liability.  For example, manufacture and designer of a faulty product would have a higher percentage of responsibility or liability than the retail distributor of the product.  Currently, 28% of the states use Pure Several Liability.
3. Modified Joint/Several Liability – This is somewhere between Pure Joint/Several Liability and Pure Several Liability and can vary greatly state to state.  Currently, 56% of the states use Modified Joint and Several Liability.

Overall, the point of this blog is that life is not fare and if you are a business that distributes products in all or most of the 50 states, the amount of monetary damages your business may be responsible for paying could largely depend on the state in which the product liability case is being tried. 

If you want to know which states use Pure Joint and Several Liability, Pure Several Liability or the Modified Joint and Several Liability, simply click on this chart.