Products Liability Legal issues
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Products liability is a serious issue that businesses must consider when developing products and placing products on the market. Defective products can cause serious injuries and even death and as such products must be properly developed and tested prior to public consumption. In addition to causing injury and death products liability law suits can cost companies a great deal of money and damage the reputation of an established brand. In recent years companies such as Toyota and BP have dealt with problems related to defective products. These problems have led to recalls and the loss of brand loyalty. The purpose of this discussion is to discuss the legal issues surrounding products liability. The research will address the liability that a firm might have if it should recall a product after being informed that it may be harmful to consumers who used the product. The research will also investigate the issue of potential liability if, after having been informed of harm to consumers who have used the product, the firm does not then recall the product.
Products Liability Legal issues
Owen (2007) reports that the current laws governing products liability actually dates back to early medieval English Law which held sellers accountable for products that contained defects. Eventually the common law of caveat emptor or let the buyer beware developed (Owen, 2007). Over time England and eventually American developed liability laws related to the manufacturers’ responsibility in sell of defective products.
According to the Legal Information Institute at Cornell University, Products liability is defined as the
“liability of any or all parties along the chain of manufacture of any product for damage caused by that product. This includes the manufacturer of component parts (at the top of the chain), an assembling manufacturer, the wholesaler, and the retail store owner (at the bottom of the chain). Products containing inherent defects that cause harm to a consumer of the product, or someone to whom the product was loaned, given, etc., are the subjects of products liability suits. While products are generally thought of as tangible personal property, products liability has stretched that definition to include intangibles (gas), naturals (pets), real estate (house), and writings (navigational charts) (“Products Liability")."
The institute also explains that negligence, breach of warranty, and strict liability can all be the grounds for a Products liability claim. Negligence is defined as “a failure to behave with the level of care that someone of ordinary prudence would have exercised under the same circumstances. The behavior usually consists of actions, but can also consist of omissions when there is some duty to act (e.g., a duty to help victims of one's previous conduct) (“Negligence")." Strict liability is an aspect of both tort law and criminal law and it is present in a criminal case when the defendant faces legal trouble as a result of a wrongful act committed without intent or mental state (“Strict Liability"). In the context of tort law a plaintiff is said to be strictly liable if they are engaged in dangerous activities or if they own certain animals (“Strict Liability"). Products liability is a type of tort law and under this particular category of law there are strict products liability statutes. Strict products liability occurs when a defective product for which a defendant is responsible, injures a plaintiff (“Strict Liability").
The grounds for a products liability claim is dependent upon the jurisdiction a claim is filed in. In addition some states throughout the nation have put into place comprehensive products liability statutes(“Products Liability"). The institute explains that these statutes can be quite different from state to state. To combat the issue of statutes being too different from one another the United States Department of Commerce developed Model Uniform Products Liability Act (MUPLA) which can be used by states on a voluntary basis (“Products Liability"). The institute also confirms that there is no federal law that governs products liability.
Regardless of the jurisdiction in which a products liability claim is filed, the defectiveness of the product must be proven (“Products Liability"). The institute reports that there are three different kinds of defects related to suppliers and manufacturers. These defects are marketing defects, design defects and manufacturing defects. Design defects are attributed to the actual blueprints or architecture of the product. A design defect is present prior to the product being manufactured and being placed on the market. In the case of a design defect the product may work but poses a danger to consumers because of defect in the way it was designed (“Products Liability"). A defect in manufacturing actually occurs as the product is being made. In many cases manufacturing defects typically occur with some products and not others. Finally marketing defects occur when directions for use are improper or consumers are not appropriately warned of the dangers associated with the use of the product (“Products Liability").
In most cases problems products liability are associated with strict liability violations. In addition the institute reports that “Strict liability wrongs do not depend on the degree of carefulness by the defendant. Translated to products liability terms, a defendant is liable when it is shown that the product is defective. It is irrelevant whether the manufacturer or supplier exercised great care; if there is a defect in the product that causes harm, he or she will be liable for it (“Strict Liability")."
Laws associated with products liability are usually part of common law statutes. These laws are also a part of the Uniform Commercial Code (UCC) (“Products Liability"). More specifically Article 2 of the UCC discusses laws related to the sales of goods and this code is now implemented by the majority of the states(“Products Liability"). The UCC contains the most significant products liability statutes which are the implied and express warranties of merchantability in the sales of goods (“Products Liability").
There are mixed opinions on the presence of products liability laws. On the one hand some legal experts have asserted that such laws are crucial to the creation of safer products for consumers. The reality of this can be seen in certain industries in which the quality of the products offered have improved drastically and the safety of certain products has also improved. On the other hand some believe that the benefits of products liability are far outweighed by the costs of such laws. According to Polinsky & Shavell (2010)
“Tens of thousands of product liability cases are filed annually in state and federal courts, including some as class or other mass tort actions that can involve thousands or even millions of individuals as plaintiffs… Product liability cases receive significant attention from the media, especially when they concern widely sold products that harm many consumers…the case for product liability is problematic for a wide range of products…the three beneficial effects of product liability — inducing firms to improve product safety, causing prices of products to reflect their risks, and providing compensation to injured consumers — are, for many products, likely to be outweighed by the litigation and related costs of product liability(1439-1440)."
With this understood, the real benefits associated with products liability law comes into question. Many argue that if such laws save one life than it is worth the costs because human life is priceless. However from the point of view of many businesses products liability can be a major issue and litigation related to product liability can cause a business to fail.
In response to the claims made by Polinsky & Shavell (2010), Goldberg & Zifursk (2010) asserts that the authors place a great deal of unfathomable confidence in market incentives and the regulatory system. However such confidence seems unreasonable because both of these safeguards have failed consumers in the past. Goldberg & Zifursk (2010) also object to the conclusions made by Polinsky & Shavell (2010) because these conclusions fail to acknowledge that people who are injured should have the right to some type of compensation from the manufacturer of the defective product. That is the arguments are based from the sole perspective of business interest as opposed to taking into consideration the interest of the injured party. According to Goldberg & Zifursk (2010) this view is unrealistic and does not demonstrate a firm understanding of what products liability is or the purpose that it serves.
Goldberg & Zifursk (2010) also assert that this criticism leveled against their colleagues is not designed to reject the fact that products liability laws are problematic and need to be revamped. In fact Goldberg & Zifursk (2010) concede that products liability
“is expensive and in some ways unpredictable. On occasion, judges and jurors mishandle scientific information, display insensitivity to business realities, are harsh in their judgments about victim behavior, and issue indefensible judgments about liability and damages. Tort law can also interfere with the operation of other institutions. Lawmakers, judges, and scholars have long wrestled with these deficiencies and others, and they will continue to do so, as they should. .. However, these are problems that call for relatively fine-grained solutions. They do not provide a reason to embrace skepticism about the value of having tort liability for product-related injuries in the first place."
Indeed the criticism is leveled at the idea that products liability laws must cease to exists altogether. Products liability needs to be in place to ensure that companies are taking the proper precautions in the design, manufacture and marketing of their products. A lack of such regulations has led to disastrous consequences in other parts of the world. So then the important thing becomes the manner in which products liability laws are enforced and the ways in which such lawsuits are handled in court.
To combat some of the problems that can arise in a company faced with a products liability suit, many companies purchase products liability insurance. In many ways such insurance is comparable to malpractice insurance that doctors purchase. The purpose of such insurance is to minimize the effects of a lawsuit if the company is sued for products liability. A company that does not have such insurance may not be able to pay awards or legal fees and may be forced to close its doors as a result.
Product Liability and Product recalls
Most companies at some time or another will have to recall a defective product. If the defective product is recognized immediately and the company quickly recalls the product and no one is injured the company may be able to escape lawsuits that often occur in cases where there is injury or death. However, if injury or death occurs as a result of a defective product, the company can be held liable in a court of law for selling a defective product that caused injury or death. In such cases companies often settle outside of court. Settling outside of court is often done so that the companies brand is not damaged any further. In addition some companies are genuinely concerned about the manner in which their products have adversely impacted the lives of their customers. In such cases the company wants to assists customers as quickly and effectively as possible. However some of these cases are tried in court and in some cases victims have been granted sizable awards.
At the other end of the spectrum there are many companies that hesitate or refuse to recall products even after they are made aware that the product is defective. In such cases both civil and criminal charges can be mounted. A perfect example of this is Toyota automobile company which was forced to recall many of its cars due to an acceleration problem. The recall occurred after the company had received numerous complaints about this problem and after people were injured and even killed. Many believe that the problem should have been addressed earlier and the automobiles should have been recalled at the first indication that a problem existed. In addition a damning internal memo from the company surfaced during Senate hearings about Toyotas actions concerning the defective products. This memo reveals that Toyota not only knew what was causing the acceleration but also attempted to do a recall involving the floor mats because it would be less expensive than fixing the real problem. In this internal memo Toyota staff in Washington D.C. claimed that the company would save more than $100 million if the company could convince regulators to stop an investigation that had been ongoing since 2007 if they simply blamed the acceleration on the vehicles’ floor-mats.
Because the company failed to act quickly in the matter it has and will likely continue to run into legal problems. In fact, one particular lawsuit involving the relatives of a California state trooper and three family members assisted in propelling Toyota's safety recall. This lawsuit was filed in February of 2010 (“Toyota Sued Over a Fatal California Lexus Crash", 2010). Since this time Toyota has been confronted with many other lawsuits.
In addition to lawsuits related to products liability. Toyota has faced a great deal of scrutiny from the federal government as well. The company has been the subject of senate hearings into why it took so long for the company to recall the defective vehicles. In senate hearing held in May of 2010 the government showed a great deal of disdain and disappointment in Toyota because the company seemed to be more concerned with fending off lawsuits than actually recalling the vehicles and fixing the acceleration problem. The committee overseeing the hearing also accused Toyota of withholding the testing data that demonstrated what the problem was with the acceleration in the vehicles (O'Donnell, 2010).
Lawsuits and government scrutiny of Toyota’s products also hurt Toyota’s brand name. For many years Toyota’s vehicles have been synonymous with quality and reliability. However as a result of the recall consumers are questioning the value of Toyota’s vehicles. In addition consumers are questioning why I took Toyota so long to recall vehicles that they knew were dangerous not only to Toyota drivers but to drivers in general. The products liability issues facing Toyota have affected the company’s bottom line a great deal.
In addition to Toyota, companies such as BP have also faced legal obstacles and consumer criticism as a result of the deep horizon oil spill. According to Lewis (2010) many problems associated with products liability can be avoided particularly as it pertains to product design defects. This is true of BP and the Deep Horizon oil spill catastrophe that could have been avoid had the company taken care and properly designed the oil pumps. Lewis (2010)
“Sometimes these mistakes are made out of misguided sense of frugality. For instance, it has been estimated that executives managing the drilling aboard the ill-fated Deepwater Horizon had hoped to save about $5 million by speeding through some of the steps to seal the well. The resulting accident has accounted for untold billions of dollars in damage. Even in less high profile instances, the cost of solving the problems arising from faulty product design usually far exceeds the cost of correcting the design problems in the first place. In my experience as a forensic engineer, I have seen countless examples of poor product and industrial design that have led to damage, injury, sometimes death—and almost in every case, large expenses for the company in question (33-34)."
Lewis asserts that companies must consider not only the costs and legal implication of poorly designed products but also the lives that such poorly designed products can affect. In the case of BP many people who make their livelihoods in the Gulf of Mexico may not recover for years to come because certain fishing grounds are now contaminated. In addition, the tourism industry in that region of the country may suffer greatly because of this oil spill. Taking short cuts on the design of products may seem advantageous at the time that such measures are taken but in the long-run people’s lives could be at stake and ultimately the company will have to pay a significant price to fix the things that have gone wrong as a result of defective products.
Overall companies must take into consideration the need to ensure that their products are properly designed, have no manufacturer defects and contain no marketing defects. If the company is aware that a product is defective it should be recalled immediately of the company wants to avoid both civil and criminal litigation. Companies that fail to conduct recalls after they are made aware of defects run the risk of consumer injury or death. In addition businesses that fell to act in a timely manner are likely to face federal regulatory bodies which can result in the paying of fines. Companies such as Toyota and BP are finding out the hard way that cutting corners and not conducting a timely recall can have adverse effects on a business that far outweigh the costs associated with ensuring that products are not defective to begin with.
The purpose of this discussion was to discuss the legal issues surrounding products liability. The investigation found that products liability is an aspect of torts law based on involving three types of defects: marketing, design and manufacturing. According to products liability laws manufacturers are responsible for ensuring that the product they offer to consumers are not defects. If these products are defective the manufacturer can be held responsible for injury or death that occurs as a result of the defective products. The investigation also found that although there are uniformed codes that states can voluntary adopt, there are no federal products liability laws. The research also addressed the liability that a firm might have if it should recall a product after being informed that it may be harmful to consumers who used the product. The research found that if the defective product resulted in death or injury the manufacturer can still be held liable and sued by the injured party or their survivors. The investigation also focused on the issue of potential liability if, after having been informed of harm to consumers who have used the product, the firm does not then recall the product. According to the research such occurrences often lead to multiple lawsuits and in some cases class action suits which can cost a company millions of dollars. The research also revealed that in the case of Toyota, consumer lawsuits were ultimately what caused the company to recall so many automobiles. With this understood companies must not abandon ethical principles to increase profits because doing so may lead to products liability lawsuits.