Even with an effective quality control process in place, things don’t always go according to plan. If you’re in the business of making or marketing products, then you may have to respond to a product liability claim from a customer at some point.
Although being subject to a product liability suit can be scary, with the right commercial insurance and understanding of product liability law, you can reduce your financial risk and take steps to ensure you don’t deliver a defective product again.
Here’s what you need to know about product liability claims, including the four most common types of defects and how to respond to a product liability lawsuit.
What Is a Product Liability Claim?
A product liability claim is a type of civil claim which a consumer files for loss or injury due to a product defect or malfunction. A claim may be filed against any of the parties involved in the manufacturing process or chain of distribution, including the:
- Product designer
- Product manufacturer
- Wholesaler
- Distributor
- Retailer
Unlike a personal injury case, the plaintiff doesn’t have to prove negligence on the part of the defendant, simply that the product was the proximate cause of harm.
Usually, the plaintiff is seeking monetary compensation in the form of:
- Compensatory damages: These refer to losses directly related to use of the product, such as medical expenses resulting from the plaintiff’s injuries.
- Punitive damages: Punitive damages may be applied if the defendant willfully downplayed the risk of harm or knowingly delivered an unsafe product.
- Economic losses: Economic losses may include non-compensatory damages, such as the cost of repairing or replacing the defective product.
4 Types of Product Liability Claims
Product liability claims apply to everything from medical devices to motor vehicles — although different legal theories apply to some types of products, such as computer software. Product liability cases tend to fall into one of four different categories:
Design Defects
Design defects are the result of flawed product design rather than an issue with the manufacturing process. For example, a car that was poorly designed and rushed to market could be the subject of a wrongful death lawsuit.
Even a thorough quality control process may not be enough to identify a dangerous product if it otherwise meets the designer’s specifications.
Manufacturing Defects
Manufacturing defects are those in which the problem arises during the manufacturing process. For products made on an assembly line, this could be an issue with a single individual product or with an entire batch or production run. It could also be an issue with a component part used in the assembly of a consumer product.
Marketing Defects
Marketing defects arise from a lack of information about the proper use of a product or the risks associated with it. Examples include inaccurate labeling, a failure to disclose side effects, and misrepresentation of a product’s intended purpose.
Businesses can reduce the risk of this type of claim by providing adequate warning of potential harms that wouldn’t be obvious to an ordinary consumer.
Breach of Warranty
A breach of warranty may arise when a product isn’t fit for use for a particular purpose. There are two main types of warranties for consumer products: an express warranty, in which a claim is explicitly stated, and an implied warranty, in which the product can be assumed to meet ordinary industry standards (unless sold with a disclaimer).
Many common law jurisdictions have a warranty of merchantability, which states that products must conform to their labels and work for their intended purposes.
How to Respond to a Product Liability Claim
Dealing with a product liability claim can be stressful, especially if it involves a product recall or presents an ongoing safety issue. Follow these steps to resolve the case as smoothly as possible and reduce the risk of additional incidents:
1. Review the Claim
When faced with a product liability claim, take the time to understand the case against you and consider your defense. A claim of negligence will require the plaintiff to prove negligence or malpractice, while a strict liability claim has a lower burden of proof.
You may have a defense based on the statute of limitations, or based on conduct if the consumer misused the product. Other factors, such as the Uniform Commercial Code (UCC), contract law, and tort law, may also have a bearing on the case.
2. Notify Your Insurers
If you have liability insurance, then you’ll need to let your insurance provider know about the claim and find out whether it’s covered by your insurance policy. In fact, you may be able to settle the claim through your insurance provider to avoid going to court.
Use a platform like Pulpstream to file and keep track of business insurance claims so you can streamline communications and resolve claims more efficiently.
3. Seek Legal Representation
If you haven’t already, choose a product liability attorney who can represent you in the case. This is especially important if you have a complex case, such as a class action lawsuit in which multiple consumers were harmed by a defective product.
A product liability lawyer will be able to help you determine the best defense, whether it’s a case of negligence, a breach of warranty, or a strict product liability claim.
4. Gather Evidence
When faced with a product liability claim, it’s important to retain any relevant business records and avoid destroying documents that may have a bearing on the case. If the product defect is related to a manufacturing issue, then you may need to conduct a workplace investigation to find out what went wrong.
Use Pulpstream’s claims management platform to store evidence — including emails, photos, videos, and incident reports — in a central, cloud-based database.
5. Arrive at a Settlement
Depending on the complexity of the case, you may be able to resolve the claim with a negotiated settlement or mediation. Product liability cases that can’t be resolved go to trial, and you may be required to call expert witnesses or testify in front of a jury.
In some states, you may be protected by comparative negligence, which means your damages will be reduced if the plaintiff is found to be partially at fault.
6. Take Corrective Action
Finally, get to the root cause of the problem and take steps to ensure it doesn’t happen again. If the product defect was caused by a distributor or supplier, consider adding an indemnification clause to your contracts to transfer risk to a third-party.
If the problem arose in-house, step up your audits and inspections and implement a corrective action plan to address equipment failures or performance issues.
Manage Product Liability Claims with Pulpstream
Facing a product liability claim can be a stumbling block for your business, slowing down day-to-day operations and opening you up to financial risk. Having the right commercial insurance policy and understanding the most common types of product liability claims can help you arrive at a negotiated settlement or prepare a legal defense.
Pulpstream’s claims management system helps you navigate multiple types of claims, including general liability, product liability, and workers’ compensation claims. Gather evidence, streamline communications, and track claim progress all in one place.
Plus, you can use our built-in claims analytics tools to review claims by type, identify patterns, and make better, data-driven decisions to reduce business risk.
Request a demo today to learn more and see Pulpstream in action!
