Product Liability and the Big Picture

March 3, 2023

Guest Blog Author: Eric Austin (Amerisure Insurance)

When most people think of products liability, their first thought is around whether a product is safe to use. When creating a product, manufacturers typically focus on design standards, product testing, and the risks associated with packaging, such as instructions and warning labels. These elements are crucial to the safe use of a product, as well as to a company’s bottom line in the event of a liability lawsuit. These focus areas, however, can also leave out opportunities to further improve a product’s safety and reduce the impact of a potential lawsuit.

“When looking at products liability, it is vital to factor in all aspects of the manufacturing process, from the conceptual phase to design and manufacturing to quality assurance, marketing, warranty, and service through end-of-product life. At each phase of the process, there are critical decisions and responses that should be addressed,” said Eric Austin, Amerisure Risk Management Expertise Specialist.

Product Safety in the Conceptual Phase

There are several historical examples of the need for product safety early in the product development process. The Gilbert U-238 Atomic Energy Laboratory was released in 1950, allowing children to use radioactive material to learn about nuclear and chemical reactions. In addition to a cloud chamber and a wire of Polonium 210, the kit also contained four glass jars containing Uranium-238. About 5,000 of these sets were sold before being removed from the marketplace – not because of the potential danger, but because the price of the set was considered too high for the time at $40. Although this may seem like an extreme example, the idea of providing radioactive materials to children should not have made it past the conceptual phase.

When looking at the big picture, your company should consistently review how products are evaluated, what could go wrong, and if similar products have resulted in losses and lawsuits. If the end user is a child, or if children have the potential to use the item, the standards should be much more stringent.

Design & Quality Assurance

During the design phase, there are several regulatory requirements and additional standards that may be in place and important questions a company should ask, such as:

  • Are the design and engineering teams aware of the standards that may apply to a new product?
  • If sub-contracted manufacturers are involved in the production process, should they have input on design? They may have pertinent insights on quality control and potential failures.
  • When are prototypes are created and, if so, how are these tested?
  • Are focus groups used with results being reviewed by engineering?

The design process should always be documented and include a method to review the effectiveness of the process and/or any changes to the product.

The manufacturing and quality assurance phase of product manufacturing should always address in-house vs. sub-contracted work. For example, is the product manufactured all or in-part by another company?  If so, what type of supplier/subcontractor qualification processes are in place? If your company follows industry standards and regulations, does the subcontracted manufacturer or component supplier follow a similar or higher standard? Is the supplier/subcontractor/manufacturer based in the U.S.? If not does it have a U.S. presence? If the supplier/subcontractor/manufacturer has no U.S. presence, your company could pay for any loss caused by the non-U.S. entity as your company placed to product into the stream of commerce in the U.S.

Product Sales & Reviews

Once a product is ready for distribution, there are several questions that should be asked prior to selling the product in the marketplace:

  • What role does the sales team play, and is the sales network in-house or outsourced?
  • Have product ads been reviewed by the design, legal, and engineering teams?
  • Do you have recall procedures and/or product traceability? Can you determine if there are problems prior to a product failing or if the instructions are unclear?

It’s also important to carefully monitor social media accounts such as Yelp, YouTube, Twitter, and Google Reviews. Monitoring social media accounts allows your company the ability to ascertain that­ a product may not work properly, the user has difficulties, the directions are not clear, or that the product fails quickly. Monitoring these sites and others also allows you to determine instances of product failure and, in certain instances, to try to resolve the issue prior to it going further.

Installation, Service & Repair

Three areas that are tied together in the manufacturing process are installation, service, and repair. In each of these phases, your company can help protect itself against a product liability lawsuit by asking the following questions: When performing an installation, can it be proved that the installation was performed correctly, with all aspects of a machine functioning properly, with all guards in place?

  • Are there photographs taken and is a specific checklist used?
  • Are service and repair teams are performing the same checks with the equipment, and do they have documented proof that all safeties and guards were installed and functional?
  • Are the service, repair, and warranty folks talking to the design team, and even sales?

Employees who work in the service, repair, and warranty departments should be having regular meetings with the design and engineering teams because this is where products may be failing in ways not originally predicted. For example, if a product is being returned with missing guards, or if the guards or warning labels are not lasting for the life of the product, the design and engineering teams need to be alerted as soon as possible. Likewise, repeated warranty issues on a specific item need to be addressed because this is where a potential recall or service bulletin may be considered. If these issues are continually popping up, the sales team will also need to be alerted when it comes to claims made about the product, warnings, changes to instruction manuals, etc.

Assessing the Big Picture

What does the big picture approach tell us about product liability and product safety? It’s easy to see that all departments and individuals must be involved in the process. From the concept and design phase, to manufacturing, service, repair, and warranty work, all employees involved should be trained and ready to alert others if they see a potential issue.

“Industry standards regarding quality and labeling should be utilized, but the process goes much deeper,” Austin said. “One missing piece may result in a situation that could result in an injury or death, plus the loss of revenue and company reputation.”

Does your program address the big picture?