Is Your Product Your Liability?

Damages claims arising from injuries or damage caused by defective products is big business for lawyers in the USA. As the ‘blame culture’ in this country continues to grow, it may not be too long before the number of these claims begins to increase here.

In 1987 the Consumer Protection Act became law in the UK and was primarily intended as a measure to protect the consumer, however the Act became far more wide reaching than was first appreciated. With the exception of the service sector, the Act applies to every business. It imposes a responsibility on businesses found liable to pay damages in the event that their product causes either injury to people or damage to property. This means that manufacturers, importers and sellers have to ensure their products are safe, fit for the purpose and meet the required industry standards.

‘Defective products’

A defective product is defined rather vaguely as ‘a product which is not as safe as someone is reasonably entitled to expect’; and the term ‘product’ includes not only the obvious manufactured goods, but also rather abstract things such as electricity, gas and….frozen peas, i.e. agricultural products that have been subjected to an industrial process!

It is not only the manufacturer that can be held liable, in some cases the importer or supplier of defective products can also be liable to pay damages to consumers and/or recall defective products. Damages are payable on a strict liability basis, which means that as long as someone can prove that they suffered harm through using a product which was defective they are entitled to receive damages. The lengths your company may have gone to in the design and implementation of quality control measures are not even a consideration once liability has been proven.

Defences

However there is some good news - there are a number of specific defences provided by the Act:

• the defect did not exist at the time the harm occurred;
• the defect could not reasonably have been discovered without the aid of scientific advances which arose after the product had been manufactured;
• the product was a component in a larger item which was designed in such a way as to cause the defect, or, the product was manufactured to specifications supplied by the manufacturer of the larger item.

Insurance

You may consider it to be an advantage to insure against claims of this nature by purchasing product liability insurance, which will cover the cost of a claim. Even if the damage caused by the defect is small, the court case or product recall costs can be enormous.

However as prudent as obtaining insurance may be, it is not intended as a catch-all and the only way to ensure your product does not become your liability is to manufacture it to the highest standards, and subject it to rigorous quality testing before it leaves the factory floor or the shop shelf. Remember nothing can recompense for the embarrassment, damage to your reputation or brand, or lost revenue caused by adverse publicity – imagine if your company was named on a TV programme like Watchdog!