Product liability comprises a number of laws and court rulings that apply to any business that makes or sells a product. Businesses that make or sell products are responsible for ensuring that those products are safe and do not pose a hazard to the public. Such businesses can be held liable for any damage or harm their products might cause.
According to Section 102(2) of the Uniform Product Liability Act, product liability includes "all claims or action brought for personal injury, death, or property damage caused by the manufacture, design, formula, preparation, assembly, installation, testing, warnings, instructions, marketing, packaging, or labeling of any product." Product liability issues have become increasingly important to manufacturers and marketing managers, due to the spread of the doctrine of strict liability and the adoption of new theories that permit recovery in so-called "delayed manifestation" cases.
Because of their limited resources, small businesses must be particularly aware of their responsibilities under product liability laws. In addition to making safe products, this responsibility extends to prominently displaying warnings of any potential hazards on products and packaging. Experts recommend that small business owners consult with legal counsel experienced in the product liability field. An attorney can help the small business owner sift through the numerous federal and state laws that apply to different types of products. Small businesses are also encouraged to purchase product liability insurance. Unfortunately, the increasing number of lawsuits and large damage awards in this area have made such insurance very expensive and reduced the amount of coverage available. In fact, the expense of insuring against product liability has prevented small manufacturers from competing in certain product areas.
DEVELOPMENT OF PRODUCT LIABILITY LAWS
Product liability began to have meaning in the mid-1800s, when the American courts increasingly found that sellers of goods had a "duty" to use reasonable care in the production of those goods. Sellers were held liable to third parties for negligence in the manufacture or sale of goods "inherently dangerous" (the danger of injury arises from the product itself, rather than from a defect in the product) to human safety, ranging from food and beverages to drugs, firearms, and explosives. In the early 1960s, tort principles were first applied to product liability. During this time, the concept of "inherently dangerous" goods was still held to be significant, but there was a shift to negligence (tort) principles that held that producers of goods were required to apply "due care" in the marketing of goods to users.
Since that time, businesses have operated under an understanding that because they knowingly market products which affect the interests of consumers, they owe a legal duty of caution and prudence to consumers. Since manufacturers may foresee potentially harmful product effects, they are responsible for attempting to minimize harm. Establishing this legal duty between the manufacturer and the consumer made it possible for plaintiffs to argue the negligent breach of that duty. These principles are now accepted throughout the country and followed by all American courts. Eventually, the concept of "inherently dangerous" products fell into disuse and the concept of negligence was expanded beyond production to include labeling, installation, inspection, and design.
Relief for Small Business?
From time to time Congress has attempted to pass legislation to protect small business from heavy exposure to product liability suits and to ease their costs of product liability insurance. The most recent such attempt was The Small Business Liability Reform Act of 2001 sponsored by Representatives Asa Hutchinson (R-AR) and Tim Holden (D-PA) and Senators Mitch McConnel (R-KY) and Joseph Lieberman (D-CT). As reported by Refrigerated Transporter magazine, the legislation sought "to limit punitive damages against small business, to ensure that small business owners are only held liable for damages in proportion to their actual fault, and to reform the current product liability system to improve protection of companies that sell or lease products, but do not manufacture them." The legislation had not passed as of Spring 2006. Earlier attempts in this direction were the Product Liability Fairness Act of 1991 and the Product Liability Reform Act of 1998. No changes, however, have been enacted.
ELEMENTS OF PRODUCT LIABILITY
Four elements must be present for a product liability case to be considered under the negligent tort principles:
- The particular defendant owes a duty to the particular plaintiff to act as a reasonably prudent person under the same or similar circumstances.
- There is a breach of such a duty by the defendant—that is, a failure to act reasonably.
- There is an injury, including personal injury or property damage.
- There is a causal link between defendant's breach of duty and injuries sustained by the plaintiff.
The concept of negligence is applicable to every activity preceding a product's availability in the market. This encompasses everything from product design, the inspection and testing of materials, and the manufacture and assembly of the product to the packaging, the accompanying instructions and warnings, and the inspection and testing of the final product are all susceptible to negligence. Negligence can result from omission as well as commission—failure to discover a flaw is as negligent as creating one. Similarly, failing to provide adequate warnings about potential dangers in the use of a product is a violation of duty.
Still, it is often difficult to prove negligence in product liability cases. Defendants only must meet the general standards of reasonable behavior as judged against the behavior of a reasonably careful competitor who demonstrates the standard skills and expertise of the industry. In reality, a manufacturer must only show that "ordinary care under the circumstances" was applied to avoid liability for negligence. This is easy compared to the task of consumers showing evidence to the contrary.
Many products, even the most ordinary, pose some level of risk, and the law recognizes that it is often not possible to design a totally safe product. However, manufacturers are legally obligated to warn consumers about known dangers. Manufacturers may be found negligent if:
- They fail to warn users about recognized risk
- The warning is too vague to be adequate
- The warning is not brought to the user's attention
There is no duty to warn against misuse that is so rare or unusual that it cannot be foreseen. The obligation to warn consumers of potential dangers poses a unique difficulty for manufacturers who must not only provide warnings, but must communicate them such that a reasonable person will find and understand them. In some cases a warning buried in a product's instructions may be judged inadequate; in other situations, a warning sticker on the product itself may be considered sufficient.
STRICT PRODUCT LIABILITY
The most recent evolution in tort law, strict liability, has transformed the very nature of product liability because it eliminates the entire question of negligence. Strict liability only requires a plaintiff to demonstrate that a product caused an injury because it was defective; the reason for the defect is irrelevant. The product itself, not the defendant's use, is under investigation.
Under strict liability, the manufacturer is held liable for allowing a defective product to enter the marketplace. The issue is a matter of public policy, not the manufacturer's unreasonable or negligent conduct. The introduction of a defective product into the marketplace brings each member of the product's distribution channel into liability for negligence. The theory of strict liability holds that manufacturers: have the greatest control over the quality of their products; can distribute their costs by raising prices; and have special responsibilities in their role as sellers.
The tort of negligence at least provided the responsible person a standard by which to measure negligence, although it imposed the added burden of proving that the defendant was negligent. Although strict liability eases those burdens for the plaintiff and improves chances of recovery, it does not provide a universally accepted standard for measuring failure. Instead, it relies on what has become known as the "consumer-expectation" test: one who sells any product in a defective condition unreasonably dangerous to the user is subject to liability for physical harm caused to the user if: 1) the seller is engaged in the business of selling such a product, and 2) the product is expected to and does reach the user without substantial change in the condition in which it is used. "Unreasonably dangerous" is defined as dangerous beyond the expectations of the ordinary consumer who purchases it. Despite its great influence, this definition has not been universally accepted.
Tort law does recognize that some products beneficial to society cannot be made entirely safe. Prescription drugs and vaccines are notorious examples. Such products are not considered defective simply because of their inevitable hazards; something else must be wrong with them as well. Therefore, drug companies are not held strictly liable for a properly manufactured product accompanied by appropriate directions and warnings. In sum, design defects are not the same as manufacturing defects.
One defense manufacturers have employed with controversy is called "state of the art." This means that manufacturers should be held accountable only for information available to them at the time of manufacture. Flaws or defects which arose due to unavailable knowledge are not considered in questions of liability. The problem interpreting this defense concerns the variation of knowledge and its applications across the country.
"APSA Supports Liability Reform Legislation." Refrigerated Transporter. 1 July 2001.
Greenberg, Lisa. "Federal—Punitive Damages." Automotive Body Repair News. August 2001.
Hart, Christine, and Mark Kinzie. Product Liability for the Professional. Thomson Leaning, 2002.
Miller, Roger LeRoy, and Gaylord A. Jentz. Fundamentals of Business Law. Thomson South-Western, 2005.