What Every Business Owner Should Know About Product Liability

Lakshya Singh Lakshya Singh
May 21, 2021 4 min read
What Every Business Owner Should Know About Product Liability

Owning a business is among the best ways to earn a high income. But it comes with its fair share of challenges and requires that you strictly follow laws and regulations set by your state. Among these are laws governing the products being sold in your business.

Product liability law is the regulation that defines who should be held responsible if your business sells a product that is unsafe, defective, or dangerous to consumers. The liability of a product that causes harm to a consumer can be placed on anyone across the entire product distribution chain.

Therefore, a product manufacturer, component parts manufacturer, assemblers and installers, wholesaler, and the retailer who finally sells the consumer can all be held liable. Read along to find out what you should always have in mind about product liability as a business owner.

Product Liability Claim

The law seeks to protect consumers by requiring that products meet some standard expectations. If a product does not meet these standard customers’ expectations, it’s considered defective and dangerous. While there isn’t a uniform federal law governing product liability in the United States, each state has its standards.

Legal practitioners such as Mark Sadaka specialize in bringing lawsuits against businesses for defective products. This is the kind of lawyer that disgruntled customers would go to if they have complaints about your product. The institution of product liability claims can be brought under these theories:

  • Breach of Warranty
  • Strict Liability
  • Negligence

Each state also has commercial statutes under the Uniform Commercial Code; this lays out warranty rules that govern product liability.

Parties In Product Liability Claims

These claims arise from products that have been sold to consumers. As long as a product was sold to someone, anyone injured by the dangerous products can seek to recover for the damages caused.

Types of Product Defects

For a product liability case to stand under any theory, the plaintiff must prove that the injuries indeed occurred because of the product’s alleged defects.  Also, they need to provide proof that the said defect made the product dangerous. Product defects are generally categorized into the following:

  • Design Defects
    It’s when the design of a product is, in a true sense, faulty. It primarily affects the entire product line rather than only one product. Examples include such things as airbags that don’t inflate as required when an impact occurs, or cloth driers that get so hot that they cause house fires. A poor design shows that an entire line of products is possibly defective and unsafe for consumers.
  • Manufacturing Defects
    Manufacturing defects are those which occur during the process of making the product. It does not affect the entire line, but only on specific products. This happens when parts or screws were incorrectly attached. Most of the product liability lawsuits arise from these defects.
  • Marketing Defects
    These defects involve the failure to give adequate and visible instructions or warnings on how to use a product properly. These claims involve unsafe products in a particular way that is not obvious to the user unless warned or correctly instructed. Examples include a steam iron with the steam valve oddly positioned without adequate warning.

How A Business Can Stay Protected Against Product Liability Claims

If you’re in the business of manufacturing and supplying products or product components, you’ll need to take responsibility for consumer safety. There are some initiatives that your business can undertake to minimize the risk of product liability claims by consumers. Here are a few things you should consider.

1. Always Undertake Comprehensive Product Testing

It may be costly, but it can’t be as expensive as a product liability claim can potentially be. Create and adopt guidelines for testing that your business must follow before launching a new product. This will help you find any possible flaws in the design, manufacturing, marketing, and use of your products.

If you fail to test the products sufficiently and they end up defective, you might be held liable. But proper testing measures limit such incidences by halting the products from reaching the consumer, therefore, averting product liability claims. In the event of a lawsuit, you should be able to give sufficient proof that you took all the necessary steps to ensure that the product was safe before it was marketed and sold to the public. That’s where thorough product testing guidelines and actions can save your business.

2. Give Adequate warning On Hazardous Products

Your business should take the steps needed to give enough warning labels on products. This is very important if you’re selling products that are considered dangerous or are at risk of chemical reactions. Disclosing and giving crucial warnings on your products can help shield your business from liability.

3. Review Suppliers Regularly

If your business makes changes or repairs products from manufacturers, you need to have specific measures to review the manufacturers’ processes and procedures regularly. You also need to test the products you receive from your supplier or manufacturer.

Also, it’s advisable to have in place legal contracts that confirm that you can’t be held liable for product liability lawsuits that are a result of defective manufacturing processes. The suppliers should be financially responsible for any product faults discovered by a consumer.

4. Get Product Liability Insurance For Your Business

It’s not a mandatory requirement, but a business should take out an insurance policy that can cover product liability claims—especially frivolous ones. The cover takes care of the compensation that the plaintiffs may be awarded for product liability claims against your business. It also takes care of legal fees. The policy cover depends on the nature of the possible risk your business is likely to suffer.

Takeaway

Anytime your business opens its doors to customers, you inadvertently also open doors for a possible product liability lawsuit. It’s very important for you as a business owner to know how product liability can affect a business. The liability can trickle down the supply chain to your level at any time, and therefore, always take the necessary measures and guidelines to protect your business.

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