Lawyer Article

Republished with permission of North Carolina Citizens for Business and Industry

Several years ago, I was introduced to General Counsel of an automobile manufacturer, who upon hearing that I specialized in product liability law remarked, "With the law that you have in North Carolina, you must feel like the Maytag repairman." Despite this relaxed view, the reality is that product liability lawsuits are a fact of life here in North Carolina and manufacturers and sellers who ignore this, do so at their peril.

In general, product liability refers to the law delineating the standards for imposing liability on manufacturers and sellers for injuries or property damage resulting from product defects. Although the specific elements of and defenses to such claims are subject to variations in state law, the core of such claims is that: 1) the product was defective (i.e. not reasonably fit or safe for intended purposes); 2) the defect (due to design, manufacture, assembly, inspection or inadequate warning or instruction) existed in the product when it left the control of the manufacturer or seller; and 3) the defect was a substantial cause of the injury or damage.

Product liability litigation can be problematic for manufacturers and sellers for a host of reasons. First, the litigation directly challenges the safety and fitness of the defendants' products. Obviously no one wants to purchase an unsafe or unfit product. No manufacturer wants to have a questionable reputation for quality and safety. Second, the litigation itself can be disruptive of corporate activities. Plaintiffs' lawyers frequently serve comprehensive document and discovery requests, and responding to these can be difficult, time consuming and costly. Searching for responsive documents now frequently includes electronic communications as well. Third, these claims usually pit an injured person against a profit driven corporation. This is a contrast that plaintiffs' lawyers exploit in front of juries. Fourth, a seriously injured individual can recover significant monies (past and future medical expenses, wage loss, and pain and suffering). Further, depending on the facts of the case and the law of the particular jurisdiction, punitive damages (damages to punish the defendant) may be available.

There is no way to completely avoid the risks of product liability litigation, but here are some suggestions to reduce these risks.

Focus on Product Safety. Consider intended and foreseeable uses of the product, as well as foreseeable misuses. To the extent possible, remove potential dangers through product design. As a general statement, any product with a potential to cause injury should come with clear and easily understood instructions and warnings.

Do Not Be Penny Wise and Dollar Foolish With Product Development and Literature. Cutting costs can save money today, but create substantial problems later. Consider using qualified "independent" consultants to evaluate the safety of product design as well as the warnings and instructions which accompany the product. Such "outside" consultants may bring a different perspective to the company analysis and help identify and minimize possible risks.

Investigate Reported Problems With the Product. Many manufacturers have established procedures to promptly investigate any reported problems with their products, including where appropriate, scene photographs, witness statements or analyses of the actual product involved. Such investigation helps in two significant ways. First, it allows the manufacturer to gather information about its product performance in the field. Possible trends or problems may be identified and resolved before serious difficulties arise. Second, in the event of a lawsuit, the manufacturer will already have basic information and evidence about the incident, which may not be available when the lawsuit is filed, which potentially might be years later.

Establish and Enforce a Record Retention Policy. Manufacturers should have clear and established procedures to maintain documents which are required to be maintained by applicable law as well as other documents, which can help defend product liability claims (including for example, design drawings, product development tests, relevant quality assurance standards and results, copies of all labels or literature accompanying products, etc.).

Educate Employees to Avoid Creation of "Bad Documents." In litigation, plaintiffs' lawyers seek documents they can use as "smoking guns" to argue that the company produced a defective product, knew or should have known it and either did not care, or worse, tried to cover it up. Unfortunately, corporate employees will sometimes generate memos or email in haste, anger or ignorance that can create the impression that claimants want. Every retained memo or email potentially could end up in front of a jury. Employees should be taught and periodically reminded to think about that before generating any communication.

Consider Periodic Product and Literature Audits. To keep up with industry trends (i.e., safety features on competitors' new products, new standards, etc.) and to make sure that reported claims and/or problems with your products are given proper analysis, consider periodic product liability audits. Product literature should also be reviewed to add or delete warnings or instructions, as needed, based on field performance, and other factors.

Obtain Appropriate Insurance Coverage For The Company. The cheapest insurance premiums may come with risks. To save money on premiums, manufacturers sometimes agree to assume defense costs in the event of a claim, thereby betting that no major claim will occur which will cost them multiples of the premium savings. This is almost always a bad idea. Consider paying a larger premium to allow the company to select specialized defense counsel knowledgeable about the company's products and industry.

Being a Responsible Corporate Citizen Helps. Plaintiffs' lawyers seek to portray product manufacturers as big, greedy institutions caring only about profits. Be prepared to demonstrate a commitment to safety in product development, the monitoring of product field performance for possible problems, and prompt disclosure and resolution of problems. Such evidence can combat the negative image presented by claimants and increase the likelihood of a fair verdict at trial.

In contrast to my colleague's inaccurate observation about North Carolina law, product liability cases are common in our state and bear serious attention by the business community.

Mr. Rom, a member of Womble Carlyle's Product Liability Litigation Practice Group, has focused his 25-year career on the defense of manufacturers and sellers in a wide range of product liability matters including pharmaceutical, motor vehicles, heavy equipment, building products, propane gas equipment and consumer products. He is a member of the Product Liability Advisory Council (PLAC), and the North Carolina Association of Defense Attorneys, where he serves as Chair of the Product Liability Committee.