Warning: The Perils of Products Liability

Making or Selling This Product May Be Hazardous to Your (Financial) Health

The waffle iron in our kitchen comes complete with 21 distinct warnings in seven languages concerning its use, including one—”Only use the appliance for food which is supposed to be cooked”—that is totally obscure. This is an example of the pervasive warnings routinely attached to products as a result of escalating liability claims. Judging from the warning labels attached to almost anything, no product is free from potential hazards. Don’t use a microwave to dry clothes (or your dog); don’t check for gas leaks with anything that can produce a spark—even a cell phone; don’t drive or operate machinery after you’ve taken a sedative.

Every product comes complete with an exhaustive list of how not to use it. Most of them are simply restatements of common sense. Although they sound dumb, there’s a real reason for their inclusion. They’re designed to protect the manufacturer and/or seller (and their insurers) from paying costly verdicts for the misuse of an otherwise harmless product.

The Legal Information Institute at Cornell University gives an “overview” of products liability law as follows: “Products liability refers to the liability of any or all parties along the chain of manufacturing 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).” That covers just about anything and anybody, making it an accurate summary of U.S. tort law on products liability.

The American Law Institute’s “Restatement of the Law Third, Torts: Products Liability” breaks down the definition into three distinct areas:

Manufacturing Defects—when the product departs from its intended design, even if all possible care was exercised.

Design Defects—when the foreseeable risks of harm posed by the product could have been reduced or avoided by the adoption of a reasonable alternative design, and failure to use the alternative design renders the product not reasonably safe.

Inadequate Instructions or Warnings Defects—when the foreseeable risks of harm posed by the product could have been reduced or avoided by reasonable instructions or warnings, and their omission renders the product not reasonably safe.

The first two have long been established as a basic part of tort law, and haven’t changed or expanded excessively in recent years. The third one, however, has been expanding rapidly, particularly in cases where the consumer/plaintiff alleges that there was a duty on behalf of the manufacturer/seller to warn of potential dangers.

Two well-publicized examples are cases against McDonald’s—one for burns from hot coffee and the other from obesity allegedly caused by eating too many Big Macs. Although McDonald’s won both, they still had to go to court to defend themselves, pay their attorneys and suffer bad publicity.

Failure to give hazard warnings increasingly subjects the defendant to costly verdicts. While it may be difficult to prove that a product is defective, or was wrongly designed, the “inadequate warning” standard is so broad that almost any lawsuit can be based on it. What is a “foreseeable risk?” What are “reasonable instructions or warnings?” It’s extremely hard, after the fact, to argue that whatever harm the product caused wasn’t foreseeable, and that it therefore should have carried the requisite warning. As a result commercial defendants are increasingly exposed to costly jury verdicts, and the costs of obtaining coverage have been escalating.

In addition, products liability is generally considered a “strict liability” tort; i.e., liability doesn’t depend on showing negligence, simply showing a defective product, or a failure to give adequate warnings, and a resultant injury is enough to establish a prima facie case of liability. It’s irrelevant that the defendant used great care, etc. All of these factors combine to make product liability lawsuits a large and lucrative area of tort law, and an expensive one in terms of jury awards.

A study published by LRP Publications, released at the beginning of 2004, examined recent trends, as compiled by Jury Verdict Research (JVR). The study noted that while it doesn’t include every jury verdict from every jurisdiction, it’s nonetheless based on a “sufficient sample of data to produce descriptive statistics for specific areas of personal injury litigation. The cases are collected in an impartial manner, with an equal emphasis on the collection of plaintiff and defense verdicts and with no intentional bias toward extreme awards or geographic regions.”

The study gives a detailed portrait of what kinds of products cause injuries, what the high, low and median recoveries are likely to be, what percentage of plaintiffs prevail, and what kinds of settlements have been achieved before trial.

It breaks down different kinds of products liability cases into three different groups—products liability cases involving industrial, construction, commercial and farm products; cases involving transportation products; and cases involving consumer and medical products. First, the study lays out the percentages, and then for each group it presents tables giving the awards. Finally, it discusses settlements.

As an example, asbestos falls in the first group. The study “examines all cases involving products containing asbestos in industrial, construction, commercial and farm products liability claims. Plaintiffs in these cases claimed that they suffered such conditions as mesothelioma, pleural thickening and lung cancer as a result of the presence of asbestos containing materials.” The “plaintiff recovery probability” is 74 percent, the highest of any of the 12 general categories.

The table below shows the amounts of the recoveries:

Source: Jury Verdict Research