Limiting Product Liability Risks: What you say (and … 1 Limiting Product Liability Risks: What you...

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9/16/2015 1 Limiting Product Liability Risks: What you say (and don’t say) will be used against you in a court of law. Presented by: Mark Gebauer [email protected] (717) 237-6052 Scope of Presentation Review of product liability law. Recent changes in Pennsylvania. How the law opens the door to limiting risks. The world of warnings and instructions. A real life case study.

Transcript of Limiting Product Liability Risks: What you say (and … 1 Limiting Product Liability Risks: What you...

9/16/2015

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Limiting Product Liability Risks:What you say (and don’t say) will be used against you in a court of law.

Presented by:

Mark [email protected]

(717) 237-6052

Scope of Presentation

Review of product liability law.

Recent changes in Pennsylvania.

How the law opens the door to limiting risks.

The world of warnings and instructions.

A real life case study.

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Marshmallows?

“A marshmallow is a particularly hazardous confection . . . .”

On the eve of National Roasted Marshmallow Day (Aug. 30), we pay tribute to the sweet ingredient that makes any form of outdoor gathering, well, sweeter. . . .

First, let’s talk safety. . . If campfires are allowed, use an existing fire ring or pit. Be sure you are at least 15 feet from tent walls, trees or other flammable objects. . .

Some experts advocate a 10-foot rule between young children and a campfire. . .

Use a roasting stick of at least 30 inches in length.

I’m from the government, and I’m here to help . . . you safely roast your marshmallows.

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I can just taste that delicious, safely roasted marshmallow! . . . Wait a second?!?!

at least 15 feet from tent walls, trees or other flammable objects

10-foot rule between young children and a campfire

stick of at least 30 inchesin length.

Is adult supervision a good idea?

Restatement (2d) Torts § 402A

• Seller of any product in a defective condition unreasonably dangerousto user or consumer

• Product reaches user/consumer without substantial change

• Liable for physical harm

• Does not matter if seller is careful

• No privity required

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Tincher v. Omega Flex, Inc., 104 A.2d 328 (Pa. 2014).

Facts:  Nearby lightning strike causes small hole in corrugated stainless steel tubing ("CSST") transporting natural gas, which ignites and fuels fire. 

§402A defect claim = CSST walls are too thin to withstand the effects of lightning. 

Defense = Lightning did not have enough energy to puncture CSST.  Lightning broke down insulation on wiring which caused fire.  In any event, the CSST was not properly bonded/grounded.

Verdict = $1 million on Strict Liability.  Defense verdict on Negligence.

Tincher v. Omega Flex, Inc. –Main Holding

A product’s “defective condition” is proven by showing either: 

• Consumer Expectation Test = Product is in a defective condition if the danger is unknowable and unacceptable to the average or ordinary consumer.Consumer perspective. “Surprise element of danger”

• Risk/Utility Test = Product is in a defective condition if a reasonable person would conclude that the probability and seriousness of harm caused by the product outweigh the burden or costs of taking precautions.Manufacturer’s perspective. More “negligence-based”

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Duty to Instruct and Warn

• Must provide instructions for safe use

• Must warn against product risks

• Identify 

• Consequences

• How to avoid 

• Reasonably expected to catch attention of careful user.  Fairly convey nature and extent of danger and how to avoid. 

• Need both Instructions and Warnings

Warnings matter for more than just failure to warn claims 

Warnings can fulfill consumer expectations:

• Is the consumer charged with the knowledge in the user manual?

Seemingly, the answer is “Yes”

Compare

Consumer Expectation Test

Product not defective if ordinary consumer could reasonably anticipate and appreciate the dangerous condition and risk of injury.

Duty to Warn

Reasonably expected to catch attention of careful user. Fairly convey nature and extent of danger and how to avoid.

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Warnings matter for more than just failure to warn claims 

Warnings are integral to risk-utility:

• Look at Wade Factors - -(1) Product usefulness

(2) Safety aspects of product - Likelihood product will cause injury(3) Availability of safer substitute product

(4) Ability to make product safer without impairing usefulness

(5) Ability of a careful user to avoid danger

(6) Dangers avoidable - known or obvious or warned against (7) Can manufacturer spread loss by price or insurance

Four out of Seven are Warnings related !

How do you make your warnings and instructions work?

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Adequate Instructions and Warnings

• Identify nature of hazard

• Alert user to severity of hazard (magnitude and likelihood)

• State consequences of hazard

• Instruct on how to avoid hazard

Warnings matter ‐ ‐ Choose Wisely

Reasonably expected to catch attention of careful user.  

Fairly convey nature and extent of danger and how to avoid. 

vs.

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ISO 3864 

• Symbol – based

• Uses colors and shapes to communicate

Prohibition Warning Safe Condition Mandatory

ANSI safety signs and symbols

Uses Signal Word + Pictorial + Words

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Which is readily understandable?

ISO ANSI + ISO Symbol

Today’s Technology Enhances Communication 

Yesterday:

Today:

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A USDA says license needed to show llamas or allow photos of them.

The Regulators are Watching

Case Study: Senator Reid “Gets Physical”

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Thank You.

Please contact:

Limiting Product Liability Risks by

Mark E. Gebauer, Esq. | Member

ECKERT SEAMANS CHERIN & MELLOTT, LLC

213 Market Street • 8th Floor • Harrisburg, PA 17101

Direct (717) 237.6052 | Mobile (717) 856.5999

[email protected]

------------------------------------------------------------------------

“An ounce of prevention is worth a pound of cure.”

— Benjamin Franklin “What you say can and will be used against you in a court of law”

— Miranda warning

If your business designs, makes, packages, sells, rents, repairs, or advertises

any product, you must consider the messages that are supplied with the product.

Communicating the right message in labels, packaging, manuals, advertisements, on

your website, and in Social Media will directly impact your product liability risks.

Risk is exposure to loss. In the context of product liability risk, the possible loss

is defined as an accident or event, a claim or lawsuit, or possible regulatory actions.

Typically, the accident or event leads inexorably to the claim or lawsuit. Regulatory

actions can arise at any time and can themselves produce litigation. Under all

circumstances, the loss equates in one way or the other to money. However, that is not

to minimize the human element of any loss. A product liability risk often involve some

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human misfortune, whether it be a physical injury or even a devastating business loss.

Limiting product liability risks is, thus, both good business and socially responsible.

The product (or service) you offer carries a message, intentional or not. What

you say (or do not say) will be used either for you or against you. This paper explores

one aspect of managing your product’s message: Effective warnings and instructions.

Why should you limit product liability risks?

Before you explore how to do something, it is always a good idea to ask why you

want to do it. Knowing the reason for action helps define what you must do. For

product liability risks, there are two interrelated reasons to act.

First, you should limit risks because it is the right thing to do. It is right not only

for your business, but it is right for your customers and society at large. Preventing a

loss or limiting an injury inures to your benefit as well as to the benefit of the person

saved. Beyond this human element, doing the right thing also encompasses satisfying

your legal obligations. As we will discuss, there are regulatory obligations and other

legal requirements that must be met. By doing the right thing voluntarily or because it is

required, you will sleep better at night, and your business will benefit from less risk of

loss.

The second reason to limit product liability risk flows from the first reason. No

one can prevent all loss. That is why this paper refers to limiting risk rather than

eliminating risk. When you are faced with the inevitable claim, you need to have a

defense. Taking the correct actions to limit risk will create your defense to any lawsuit.

And, if you have acted for the right reasons (see “do the right thing,” above), the ladies

and gentlemen of the jury, will more likely judge you less harshly.

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Consequently, you should limit product liability risks to avoid losses and to help

you defend the losses that are unavoidable.

A Product Liability Risk Management Program.

Effectively limiting product liability risks requires a systematic approach. You will

accomplish your loss limiting goals by implementing and maintaining a program that

encompasses the following:

1. Addresses all products and services.

2. Covers all facets of product development , including design, manufacture,

warnings/instructions/product literature, sale, service, advertising, consumer

relations, and on-going.

3. Identifies issues – assesses risks – implements corrective actions.

4. Improves products.

5. Regulatory compliance.

The specifics of any particular program will depend upon your business, your

products (or service) provided, and the nature of your customer base. However, a good

outline includes the following:

1. Management buy-in/Company policy.

2. Product Liability Risk Assessment/Audit.

3. All Departments involved.

4. Centralize – companywide or by division.

5. Product Safety Manager – with Authority.

6. Safety Committee – permanent and regular.

7. In-house and outside counsel involved.

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8. Records management.

Developing a program that fits your business starts with taking stock of what your

risks are. Some information comes from your claim history, but that is not the end of the

story. Not every risk matures into a claim. New risks emerge as your products, your

customers and society changes. One element of a risk management program is

developing effective warnings and instructions.

Why Warnings and Instructions Matter.

Strict product liability was cemented as part of the law with the advent of

Restatement (Second) Torts §402A. Product suppliers could be liable if the product

was supplied in a defective condition, unreasonably dangerous to the user or consumer.

Under strict liability, a product supplier’s carefulness in designing, manufacturing, or

selling the product was irrelevant. A determination of defect and proof of causation

produced liability.

As the law developed, somewhat distinct categories of defects were recognized.

Thus, defects in manufacturer, design and warnings were seen as independent grounds

to declare a product defective and assign liability to the product supplier. Pennsylvania

has generally followed this approach.

However, the Pennsylvania Supreme Court recently redefined our strict liability

law in the case of Tincher v. Omega Flex, 104 A.2d 328 (Pa. 2014). Without getting into

all of the details of that lengthy and somewhat complex decision, suffice it to say that

the main holdings provided new (for Pennsylvania) criteria for defining defective

condition. A product’s “defective condition” is proven by showing either:

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• Consumer Expectation Test = Product is in a defective condition if the danger is

unknowable and unacceptable to the average or ordinary consumer.

• Risk/Utility Test = Product is in a defective condition if a reasonable person would

conclude that the probability and seriousness of harm caused by the product

outweigh the burden or costs of taking precautions.

The Consumer expectation test, as the name suggests, judges the product from

a consumer’s perspective. It is meant to address the “surprise element of danger.” On

the other hand, the risk utility test views the product more from the manufacturer’s

perspective. By balancing risk and utility, it takes a more “negligence-based” approach.

Although neither the consumer expectation test nor the risk-utility test specifically

addresses warnings and instructions, both offer a product supplier the opportunity to

limit product liability risk through the use of better warnings and instructions.

Generally speaking, the duty to warn requires suppliers to provide instructions for

safe use, and to warn against product risks. This means identifying the risks, the

consequences, and how to avoid them. The warnings and instructions must be crafted

in a way so that they are reasonably expected to catch attention of careful user, and

fairly convey nature and extent of danger and how to avoid it. Both instructions and

warnings are required.

Complying with the consumer expectation test or risk-utility test means that the

product is not defective. Supplying the product with effective warnings and instructions

will help meet the two tests and also provide a more defensible product. For instance,

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Compare the words of the consumer expectation test with the duty to warn:

Consumer expectation = The product is not defective if the ordinary consumer could reasonably anticipate and appreciate the dangerous condition of the product and the attendant risk of injury.

Duty to warn = Reasonably expected to catch attention of careful user. Fairly convey nature and extent of danger and how to avoid.

As can be seen, by properly warning or instructing a consumer in a way that

catches her attention may satisfy the consumer expectation test by alerting the

consumer to a dangerous condition.

Similarly, the risk-utility test commonly involves several factors for the jury to

weigh:

(1) Product usefulness

(2) Safety aspects of product - Likelihood product will cause injury

(3) Availability of safer substitute product

(4) Ability to make product safer without impairing usefulness

(5) Ability of a careful user to avoid danger (6) Dangers avoidable - known or obvious or warned against (7) Can manufacturer spread loss by price or insurance

The factors highlighted in red implicate warnings and instructions.

Thus, under either consumer expectation or risk-utility, a product supplier can

better defend his product with proper warnings and instructions.

How to Warn and Instruct.

As stated, proper warnings and instructions must:

• Identify nature of the hazard.

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• Alert the user to the severity of the hazard (magnitude and likelihood).

• State the consequences of the hazard.

• Instruct the user on how to avoid the hazard.

The complete process of creating proper warnings and instructions is beyond the

scope of this paper to fully address. However, generally speaking, the process involves

(1) identifying the risks; (2) examining the law and regulations which may govern the

wording and format of the warnings and instructions; (3) developing the best method to

communicate in the most effective manner.

On the latter issue of communicating, standards have developed over time that

are widely accepted and provide the product supplier with much guidance on how to

craft their messages. The two predominant standards are the ISO (International

Standards Organization) and ANSI (American National Standards Institute). The ISO

standards are used widely in Europe and focus on a symbol based communication

approach. The ANSI, on the other hand, use a combination of signal words,

symbols/pictorials and a word message. Below are samples of each:

ISO uses colors and shapes to communicate.

Prohibition Warning Safe Condition Mandatory

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ANSI uses signal words, pictorials and word messages.

Selecting one approach over the other depends upon the product, the market,

and the users. For instance, the ISO method may be best where the product users

speak many different languages making a word message cumbersome or impossible.

Or, a federal regulation may dictate a particular message using specified words, which

would then lend itself to the ANSI approach. Whatever standard is utilized, the goal is

effective communication.

Conclusion.

Limiting product liability risks naturally starts with designing better and safer

products. But, the warnings and instructions accompanying the product are as

important as any component. They are, in fact, an integral part of the product. Plus,

common law and many governmental regulations require proper warnings and

instructions. As such, creating effective warnings and instructions can go a long way

towards producing a better product, avoiding accidents and providing a defensible

product at trial.

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