Erik B. Anderson Senior Attorney, Corporate Legal Liberty Mutual Group May 19, 2009 Product Liability in Engineering Design Key Legal Concepts This presentation is for general education purposes only and not to be construed as legal advice. 1
What is Product Liability Law? • Tort law : A civil wrong for which the harmed person can obtain a remedy through a court of law. – May also be a criminal act, but not always. – Typically, an intentional or negligent act or omission which causes harm to the person or property of another. • Contract law : a legally binding agreement between two parties enforceable in a court of law. • Product liability law: an area of law that lies at the intersection between the law of torts and contracts. 2
Example: Television Breaks • You bring home a new 56” Plazmatron television from your local big box retailer. • You hook it up and enjoy it for a few days, but then it stops working. • Who is responsible? Why? • What can you do about it? 3
Legal Concept: Contract • Your legal theory is breach of contract. • You have a contract with the retailer – Oral contract (evidenced by the receipt) – Return policy is probably part of your contract. – If you’ve complied with the return policy (i.e. receipt, original packaging, within certain time period, etc.), you can probably return it. • The retailer, in turn, has a contract with the manufacturer. – The retailer will return the unit to the manufacturer, depending on the terms of the contract between those parties. 4
Legal Concept: Warranty • In addition to your contract with the retailer, your TV probably came with a limited warranty from the manufacturer. • Warranties are a more specific type of contract. • Warranties are almost always limited (e.g. repair or replacement). • Warranties can be express (e.g. from an advertising claim) or implied by law. Most states impose two implied warranties: • Implied Warranty of Merchantability: warranty that the goods are generally fit for the ordinary purpose for which they are used. • Fitness for a particular purpose: warranty that the goods are fit for a specific purpose and seller knows that buyer is relying on seller’s expertise in selecting the goods. • Implied warranties reflect a state policy choice that manufacturers are better able to bear the burden of loss than the consumer. However, a properly written limited warranty can usually disclaim all implied warranties. 5
Example: Plazmatron Catches Fire • Let’s say your new Plazmatron TV not only breaks, but catches on fire and causes property damage to your house and causes you bodily injury (smoke inhalation, burns). • Does your contract with the retailer cover those harms? • Does your limited warranty cover those harms? 6
Product Liability Law: Background • Generally, based on tort law, but codified by the legislature as part of a state’s statutory scheme. • Most states base their product liability act on a model act written by the American Law Institute. • The Washington Product Liability Act is codified at RCW Chapter 7.72. 7
Product Liability Law: Definitions • “Product” – object possessing intrinsic value – capable of delivery either as an assembled whole or as a component part or parts, and – produced for introduction into trade or commerce. • “Manufacturer” – a “product seller” who designs, produces, makes, fabricates, constructs, or remanufactures the relevant product or component part of a product before its sale to a user or consumer. – also includes a product seller or entity not otherwise a manufacturer that holds itself out as a manufacturer (e.g. store brands). • “Product Seller” – Any person or entity that is engaged in the business of selling products, whether the sale is for resale, or for use or consumption. – Includes a manufacturer, wholesaler, distributor, or retailer of the relevant product. 8
Product Liability Law: Examples • What’s all that legal jargon mean? Well, which persons or entities could be liable under the WPLA for your property damages and bodily injury after the fire? – Friend who helped you mount the TV? – Installer service hired through the retailer? – Electrician who did your wall re-wiring? – Retailer who sold you the TV manufactured by Plazmatron, but repackaged it under its own name as Big Box Plazmatraz? – Component supplier who sold component part that overheated? – Extension cord company that manufactured the power supply cord you bought separately? 9
Product Liability Law: Basics • When is a product seller or manufacturer liable? – Manufacturing Defect – Design Defect – Inadequate Warnings or Instructions (at time of sale) – Post-Sale Failure to Warn 10
PL: Manufacturing Defect • Exists when a product is not reasonably safe in construction because the product deviated in some material way from the design specifications or performance standards of the manufacturer, or deviated in some material way from otherwise identical units of the same product line. • Which are examples of a manufacturing defect? – The power cord of your unit is nicked when it moved down the assembly line. – The plans specified the wrong semi-conductors. – An experienced assembler called in sick, and the substitute didn’t quite follow the assembly plans. – The Parts Department ran out of the specified semi-conductors, so a lower grade substitute was used. 11
PL: Design Defect • Risk-Utility Test: – A product is not reasonably safe as designed if at the time of manufacture, the likelihood that the product would cause the claimant's harm or similar harms, and the seriousness of those harms, outweighed the burden on the manufacturer to design a product that would have prevented those harms and the adverse effect that an alternative design that was practical and feasible would have on the usefulness of the product.” – In other words: • Probability of harm x gravity of harm > cost of alternative design + diminished utility of alternative design. – Example: Automatic Transmission Fluid Machine 12
PL: Design Defect • Consumer Expectations Test: requires showing that product is more dangerous than ordinary consumer would reasonably expect. Focus is on the reasonable expectations of the consumer. • Examples: – Snow tube (consumer would expect tube to rotate, but not continue backwards). – Baby walker (mobility held an obvious danger). – Trampoline (no evidence that trampoline was more dangerous than ordinary consumer would expect). • Which of the following are examples of a design defect? – Your Plazmatron fire was caused by an inadequate metal oxide varistors in your power cord. Two years later, the power cord manufacturer develops a safer design. – Your Plazmatron fire was caused by a loose wire connection, contrary to specs. – Your Plazmatron fire could have been avoided if the manufacturer had used a higher grade semi-conductor available at the time, but that would have cost another $10.99 per unit. – Your Plazmatron cord couldn’t reach the outlet, so you used an old two-prong extension cord. 13
PL: Inadequate Warnings/Instructions • A product is not reasonably safe because adequate warnings or instructions were not provided with the product, if, at the time of manufacture, the likelihood that the product would cause the claimant's harm or similar harms, and the seriousness of those harms, rendered the warnings or instructions of the manufacturer inadequate and the manufacturer could have provided the warnings or instructions which the claimant alleges would have been adequate. • Again: probability of harm x gravity of harm makes warnings/instructions inadequate + adequate warnings could have been provided. • Warnings: ANSI, ISO, and other conflicting standards. 14
PL: Post-Sale Duty to Warn • After the time of manufacture, if a manufacturer learns of a danger with the product, or reasonably should have learned, it has a duty to use reasonable efforts to issue warnings or instructions about the danger. • Post-sale duty to warn could include issuing alternative instructions, product alerts, bulletins, or even product recalls. • Examples: portable cribs with collapse potential. • Which of the following might create a post-sale duty to warn? – Your Plazmatron fire occurred after you plugged it into a two-pronged extension cord. – Your Plazmatron fire is one of ten units to be involved in a fire out of 400,000 units sold, though the cause of those fires remains to be determined. – Your Plazmatron fire was three units to be involved in a fire. Plazmatron determined that each of the three fires were caused by substitution of a low- grade wire, contrary to specifications. 15
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