As products’ safety is one of the primary responsibilities of supply chain members, it has been noted by legislators with the highest level of significance. Therefore, product liability is known as an issue which can jeopardize whole the business. There are many cases about companies who went bankrupt due to small potential liability issues which in normal circumstances nobody noticed and considered them as a factor. That is why only experienced and veteran attorneys handle product liability concerns and that is the reason why a company must consider product liability as one of its potential risks with high level of consequences. The present paper discusses the importance of product liability and how the product liability laws evolved from tort laws. The main issues which will be discussed in this paper are as follows: •The different aspects of product liability based on tort laws, •The effects of product liability cases on companies
•Analyze three international business product liability cases •Provide some advices for Canadian exporters in terms of tort law for product liability. Discussion
Undoubtedly, product liability is one of the most controversial legal concepts especially during the last 20 years. Before addressing the legal aspects of product liability laws, it is needed to have a clear definition of “Tort Law” and “Product Liability”. Tort law
Tort is “a private or civil wrong or injury, other than breach of contract, for which the court will provide a remedy in the form of an action for damages”. The purpose of tort law is to compensate the injuries or damages and it does not talk about punishment of offenders. Based on the common law tort law, regardless if the parties have a contract or not, a plaintiff can sue the defendant to cover his/her injuries if he/she can satisfy the court about following elements: 1.The defendant owed a legal duty to plaintiff
2.Breaching of the duty by defendant
3.The damages are the result of defendant’s fault
Based on the Black Law Dictionary , product liability “refers to the legal liability of manufacturers and sellers to compensate buyers, users, and even bystanders for damages or injuries suffered because of defects in goods purchased”. The condition under which a manufacturer is liable is that the products must be unreasonably dangerous to users or customers. The defect can be created by a retailer, wholesaler, distributer or bailer as well as manufacturer. Types of product liability laws
The product liability laws have existed for a long time in different forms. During the time, tort laws for covering the compensation of injuries caused by defective products have been shifted toward “pro-consumer” in order to ease the conditions for injured people to obtain the compensations sooner and easier. As the impact of such evolutions in product liability laws, for example during 1973-1986, the number of filing cases for product liability in the United Stats’ federal courts increased fourfold. Motor vehicles, pharmaceutical and asbestos industries were the majority industries in these cases. The oldest form of product liability is “liability in contract” which in order to claim for any compensation, plaintiff needs to show a written contract including terms of the goods ‘quality specifications and terms of liability for any injuries due to these products. The problem of this form is that the plaintiff can just prosecute the direct seller and cannot file a legal action against manufacturer or whole the group. It should be mentioned that “warranties” are considered in Contract laws and assure the seller’s or producer’s claims about the sold products. “Negligence” is another type of product liability which is a result of “not meeting an applicable standard of care, with the inherent assignment of fault”. Another type of product liability law is “strict liability” which is “tort law that a manufacturer is responsible for certain types of harm without demonstration of fault”. In this type of law, it is just enough that a tort happens, regardless if it was intentional or unintentional and the only thing matters is that the injury has occurred due to any defection in the product. In contrast with the United States which product liability is based on “the doctrine of strict liability”, in Canada, product liability claims are based on “fault”. It means that the plaintiff must prove a defection due to manufacturing process or product design, or negligence to warn an inherent peril of a product by manufacturer or distributer. The effects of product liability cases on companies
Regardless of winning or losing a case, product liability can affect companies in various fields. Some these effects are as follows: •Product liability can transfer manufacturers’ money to injured customers. In some cases, even it can lead to manufacturer bankruptcy. •Even if manufacturers or suppliers win the case, it can be costly for them. For example Dow Corning, a multinational corporation, spent $8 million dollar for legal process in a case which they finally won. •Product liability forces the companies to improve their quality assurance and quality control systems and methods •Based on Colangelo and Thornton research, the most important areas of product liability cases are design defects by 39 %, manufacturing defects by 37 % and failure to warn by 21 %. Therefore it forces companies to develop their R&D departments and invest more on production design, especially for technical products. •Due to the competitive environment growth in global economy, product liability can be a competitive advantage for companies. Companies who focus on R&D, reduce their manufacturing defects and provide useful and sufficient information regarding to different aspects of their products can increase their market share. By contrast, having product liability cases or recalls, can destroy the companies’ image and reputation. •The liability cases take too much energy, time and costs from companies and do not let them focus on their main activities. CASE STUDIES
Following are three examples of complex product liability cases. a.GM Case
This section summarises the General Motors Corporation pick-up truck fuel tank products litigation —MDL No. 961 (E.D. Pa.) This class action litigation discuss General Motors’ side-saddle fuel tank placement on certain model year full size pick-ups. General Motors’ product liability exposure is due to the mounting of gas tanks on the outside of the frame of the vehicle. This is increasing the risk of the fire after collision. The litigation filed in 1992 and 1993 with numerous separate lawsuits in 11 states across the United State against GM. The suits included production models from 1973 to 1987. Twenty-six of the suits were transferred and consolidated in Pennsylvania as part of MDL No. 9616 and eleven class action complaints were pending in other state courts. A committee of lawyers were selected by MDL court to represent more than five million people who had these vehicles. Initial settlement was reached in MDL 961 certifying a 49-state settlement class on 16 December 1996. General Motors’ decision was an effort to limit its future liability exposure in light of large verdicts obtained by individual plaintiffs because of the side saddle design defect; however some people did not accept this settlement and appealed. The appellate court disapproved the settlement7. On 3 July 1996 a new settlement was reached in Louisiana state court8. It is now well-established that a state court judgment approving a class settlement can affect a release of federal claims, and the judgment must be accorded full faith and credit by the courts of other states. Under the state court settlement, each General Motors pick-up truck owner as of 19 June 1996 would receive a $1000.00 certificate toward the purchase of any new General Motors light duty truck or automobile. The settlement class was complex because included consumers, government and fleet owners. The consumer certificates should be used within a 33-month period, after the mailing of final notice. A fleet and/or governmental entity certificate should be used within 50 months. General Motors agreed to pay the costs of class notice and all lawyer’s fees in connection with this $5 billion settlement. Persons who do not wish to accept the settlement have the right to opt-out and pursue their own claims in the court system10. In most class action cases only a few people might chose to opt-out because of the huge expense involved in taking up their cases individually. b.PETRO-CHEMICAL CASE ANALYSIS
Nitrogen tetroxide N2O leak at Bogalusa, Louisiana No. 73 341 (22nd Judicial District Court, Washington Parish, LA)
On 23rd of October 1995, a catastrophic spill of nitric acid occurred at the Gaylord Chemical Company facility in Bogalusa, LA. As per Emergency crews release of nitrogen tetroxide occurred as a result of Increased corrosion in a rail tank car while diluting nitric acid, which had been delivered as a 75% solution instead of nitric tetroxide as expected. Approximately 3000–4000 people were evacuated with the remaining community ‘sheltered in place’. Several hundred people were sent to local hospitals with eye, nose and respiratory conditions. It is estimated that this litigation will exceed one half billion dollars. This case will involve the Illinois, Central Railroad, the Kansas City Railroad, Union Tank Car Company and Gaylord Chemical Company. Experts involved in this litigation include meteorologists, pressure vessel mechanical engineers, clinical, Toxicologists, neurologists, air-modeling experts, pulmonary experts, forensic psychiatrists. It appears that corrosion played a major role in this chemical release. Any multi-national company producing or selling chemicals in the USA should become aware of the use of scientific literature such as Safety data sheets. Following reference books should be fully understood in a chemical release situation: 1. Sax’s Dangerous Properties of Industrial Materials;
2. Handbook of Industrial Toxicology
3. Emergency Handling of Hazardous Materials in Surface Transportation 4. Casarett and Doull’s Toxicology
c.MEDICAL PRODUCTS AND DRUG COMPANIES
Orthopedic bone screw products liability ligation—MDL No. 1014 (E.D. Pa.) This MDL includes 2000 suits impacted nearly 5000 persons with some sort of physical injury. This was caused by plates and screws for spinal implantation which was originally approved by FDA only for long bone such as arms or legs. Despite of FDA prohibition, Surgeons were encouraged to use orthopedic screws in the pedicle of the spine, These screws were used in spinal surgery of 30000 to 70000 persons. One manufacturer was sued in 63 jurisdictions in 43 states. Some manufacturers were promoting it trough their training and advertising. The estimated exposure to these manufacturers exceeds one billion dollars. FDA has stopped these manufacturers from promoting and advertising as a result the agency warned seven firms to stop all illegal promotions. Some advices to Canadian exporter regarding product liability By following some actions and rules, we can diminish the product liability risks; although it seems to be impossible to eliminate the product liability risks, completely. Some of these actions are as follow: •Contractual liability: being sure to have a contract with suppliers that if any injury happens because of their defective products, they have to take care of any loss imposed to the exporter or manufacturer and they are responsible for compensation of injuries •Device vigilance: having effective quality assurance and quality control systems and also being prepared to do corrective actions even in crisis; for instance being prepared to recall defective product. •Document management: being conscious about the way they communicate with internal personals or claimant’s lawyers regarding safety issues. They should document every letter or evidence and prevent to just rely on emails, phone calls or verbal conversations. •Awareness about other countries’ product liability regulations and laws especially safety standards which they use. •Buying Liability insurance can be an offer to reduce the risk of product liability because the costs of product ability can exceed the costs of court awards, settlements, and insurance expenses.
This paper discussed the different aspects of product liability considering the tort law. It had a look into different forms of product ability laws such as Contract, Negligence and strict liabilities. Different countries follow different forms. Then, it talked about some effects of product liability cases on companies such as financial aspects, companies’ research and development projects, share-market and competitive advantages, quality assurance and control improvement and finally companies’ focus on core activities. Three different case studies were explained. At last, the paper suggested some advices to Canadian exporter regarding product liabilities. As the final point, it should be mentioned that the consequences of product liability can be too high for companies and any negligence can lead to irrecoverable damages and losses.
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