There are hundreds of thousands of industries that are into manufacturing all kinds of products, components, and other consumer items. Most of these products come with warranties that protect the consumers from getting saddled with a faulty product or component. But, what about the accidents that may happen using defective products?
The manufacturers are responsible for the safety of users of its products. Governments all over the world have created their watchdogs to ensure this. In the US, it is the Federal Trade Commission (FTC), and in the UK and certain other countries, it is the Consumer Protection Act (CPA).
What is product liability?
When an industry comes out with a product, it is supposed to test it not only to ascertain it is in working order but also to ensure it is safe for use. However, at times, faults in design or manufacturing may crop up making the product defective. Even the absence of warning regarding risks involved in using the product count towards marketing defects, even though it is not a physical defect.
It is these ‘defective’ products or lack of warning about the risks that product liability relates to. It may extend to specific products or even to a batch of items or the entire product design itself. The consumer at the receiving end may sue the manufacturer for their defective product by hiring a products liability lawyer.
For industries, product liability claims may translate into damages worth millions of dollars. Just to give an inkling as to the kind of damages that may be imposed on the industry for injuries, the annual figure has been estimated at $12 billion! And these are not rare occurrences; they happen every year. Users sustain injuries and even get killed using defective products. Many small businesses have been known to fold in the face of product liability.
But, there is much that manufacturers can do to protect themselves. Let’s see how:
1. Product testing of the highest order
There is no shortcut in this. A manufacturer is asking for trouble if it fails to carry out thorough testing of its products since it amounts to negligence. Testing helps in determining whether the product is safe for use by the consumers. It also helps pinpoint any defects in the product or its design beforehand. By taking reasonable steps when launching a new product, the manufacturers can prevent such defects and avoid product liability.
2. Include warnings on dangerous goods
It is crucial for the manufacturers to provide appropriate and effective warnings on product labels, especially if the products are hazardous. Failing to warn the users regarding the potential danger of the product can leave the manufacturers wide open to claims. A case in point is the $28 billion award in damages given to a person with lung cancer, who claimed that a cigarette company failed to advise her against the risks of smoking. The warning should either be included with the product instructions or printed on the package.
3. Ensure non-defective supplies
A business cannot manufacture all the components required for its products by itself. It has to rely on the suppliers for parts and components. It also has to ensure that the outsourced repair entity is well versed in removing the defects accurately to keep the product safe. The manufacturers can ensure this through legal contracts that hold the suppliers and service providers responsible for product defects at their end.
4. Take recourse to product liability insurance
Although not mandatory, a product liability insurance will cover the manufacturer or distributor from any product liability lawsuits. By taking out this insurance, the manufacturer stands to gain, since it covers the compensation awarded for injury due to faulty product or design. It also includes the legal fees. However, the coverage will depend upon the nature and perceived risk of the product. The manufacturers will need to check the exclusions and stipulations that come in fine print along with the insurance. A product liability insurance in the range of $1 million to $5 million will provide adequate coverage for most businesses.
Conclusion
Businesses cannot shy away from their responsibility of making their products and components safe for use. If they do, they do so at the risk of losing millions of dollars in product liability. Adopting the suggested steps will help them in preventing such situations and save on compensation.
