Preparing for Product Liability Defense: Eight Items to Have in Place
Product liability is a practice area of business law that involves matters related to allegedly defective products. These products may be but are not limited to, automobile parts, aircraft parts, medications, medical devices and toys. They may be any product or commodity that plaintiffs have identified as the cause of environmental harm, personal injury or death.
All designers, manufacturers, distributors, resellers and others in a product’s supply chain should be aware of the risk that a consumer or consumer group could claim that a defective version of the product caused an injury or death. Likewise, consumers and consumer groups may claim that the product itself is inherently defective.
The prohibitive cost to defend against those claims as well as the potential for such claims to leak into the press and affect a company’s reputation make planning for product liability defense an important part of contingency planning. Here are eight items that South Florida Law recommends to have in place to prepare for an eventual product liability claim.
Note that putting all eight of these factors in place properly requires the combined expertise of a multidisciplinary group of advisors including an experienced product liability and business law firm such as South Florida Law.
1. Product Liability Insurance
Every company that designs, develops, manufactures, distributes or sells a product should have an appropriate product liability insurance policy. These policies insulate the insured business from the legal costs and other financial liability related to a consumer claim.
Learn more about product liability insurance for businesses here
2. Product Liability Attorney
Going hand-in-hand with product liability insurance is a product liability attorney. Experts in this practice area are experienced at both defending against active claims and proactively limiting the possibility of a claim through preventative measures. Therefore, the best time to retain a product liability attorney is before there is a legal claim made against your company.
Learn more about the benefits of retaining the services of a product liability attorney here
Properly labeled products make it easier for businesses to protect themselves against “improper labeling” and “failure to warn” claims. Together, these claims present a threat to any defense making it more likely that a case goes to court or that the business involved is forced to settle at a much higher price. Labeling should be unique not only to the industry or product category, but should also be customized to the specific product or commodity. The more a label is customized to fit the characteristics of the specific product, the more likely it is to cover all warnings and intended uses of the product.
4. Third Party Quality Control
Contracting a third party to analyze the safety parameters of a product can help protect a company in two ways. First, it protects designers, manufacturers and distributors by potentially discovering weaknesses in a product’s design. Future updates of the product could include “fixes” to these weaknesses thus helping to prevent actual consumer injury or death. Secondly, involving a third party in the vetting process for a product adds another party to the distribution chain for your product. Now, liability is shared among one more member, potentially diluting the financial and reputational impact of any potential consumer claim.
“The more a label is customized to fit the characteristics of the specific product, the more likely it is to cover all warnings and intended uses of the product.”
5. Public Relations
One of the strategies employed by the legal teams of plaintiffs in product liability cases involves attacking the reputation of the product’s brand or the companies that design, make, distribute or sell it. An assault on a brand’s reputation can be extremely detrimental to both current and future company revenue from that brand.
To guard against this, public relations (PR) companies can be retained proactively to begin to tailor the brand’s story and build up a solid public reputation that can be difficult for plaintiffs and their lawyers to assail. Part of the work done by a PR company should also be to set up a contingency plan to manage the reputation in the case that allegations or injuries are made. Having a PR company on retainer to build up and protect a brand can help a business continue to operate in the face of any attack on its reputation.
6. Search Engine Optimization
As a complement to general reputation management via a PR campaign, it is important to regularly cultivate a brand’s online story. This can be done by periodically posting articles about the merits of the brand on the internet, listing the company or brand in top Internet directories, managing social media profiles for the brand and creating rich media content such as infographics and video to tell the brands story. Building up online authority and relevance prior to an attack on a brand’s reputation makes the business less likely to be impacted negatively. Better search engine optimization (SEO), gives businesses that manage brand reputations more strength at the negotiation table during product liability cases.
7. Brand Diversification
If a solid PR strategy and a thorough SEO plan do not do enough to protect a brand’s sullied reputation, then a business may have no other choice but to rely on its other brands for revenue. However, what can a business that only has one brand do in this case? That company may be at a serious disadvantage if it tries to create a new brand in the midst of a contentious product liability claim.
One way to avoid getting in this situation is to always maintain a portfolio that distributes the risk across a number of brands and different product lines.
While this may be easier for larger enterprises such as international automakers, it can also be done by smaller businesses with the right planning. The key is to make sure that the amount of products and brands are manageable for the business given its resources. Properly executed, a diversified brand and product portfolio can pay dividends if one of the brands falls victim to an alleged product liability claim.
8. Proper Business Formation
It may be necessary to protect a business from the financial liability that comes from losing a case. If a case is lost, it may require a company to liquidate certain assets in order to make reparation payments to an injured consumer or class of consumers.
That can create a threat to business continuity if the assets of the company are not properly sheltered in a separate business entity. Furthermore, if the business is not formed as a corporation or LLC, it is likely that the personal assets of the business owner may also be at risk. Finally, even if an LLC or corporation has been chosen as the company formation type, courts may investigate the finances of the business to determine if the “corporate veil” has been breached. This means checking to see if the individual or business that operates the limited liability entity has commingled funds in any way that possibly could negate the limited liability aspect of the entity type.
An experienced business lawyer will be able to advise businesses of the risks they face based on their current business structure and formation choices. In tandem with an accountant, a lawyer can put fiscal protocols in place to prevent breaching the “corporate veil” and potentially putting important assets at risk.
South Florida Law
South Florida Law represents manufacturers of a broad range of products throughout the United States in state, federal and multidistrict litigation.
We have substantial experience handling defense claims for insurance carriers. Their insured’s and self-insured companies involving diverse lines of products. We have backgrounds in the defense of manufacturers, distributors, retailers, and all parties named in product liability cases.
We achieve desirable results by working together with our clients to develop cost-effective defense strategies, consulting with engineers to develop solid defenses, retaining respected experts to support our case and aggressively deposing opponents’ experts.
If you or your company has been accused of causing injury or death to consumers then contact South Florida Law today via our contact form or by calling (954) 900-8885.