Best Practices in Product Liability Management

By Terzich, Sam | Risk Management, August 2005 | Go to article overview

Best Practices in Product Liability Management


Terzich, Sam, Risk Management


"Death Blamed on Medication"

"Tough Bagel Botches Anniversary; Couple Sues Restaurant for Broken Tooth"

"Carbon Monoxide Poisoning Allegations Gain Momentum"

"Rotary Hammers Recalled"

"Worker Dies in Tractor Rollover; Seat Belt Attachment Faulted"

Headlines like these appear in the news every day, and when they do, companies lace some tough decisions. On one hand if a product is a safety hazard, there is an ethical and legal responsibility to take action to protect the public. On the other hand, sometimes lawsuits are filed over situations where there is no genuine product deflect or liability. Then the company must decide whether to settle or fight.

With hundreds at products on the market, the last thing any manufacturer wants is lot a product's integrity to be questioned A product recall, a high-profile lawsuit or a potential class action suit are events that can destroy a brand reputation that has been carefully built tip through years of marketing and customer service. Immediately, the damage is clone, despite the fact that many product liability claims have no merit and there is nothing wrong with the product, just someone saying there is.

Companies often settle such lawsuits just to get rid of them. It may seem caster or more cost-effective in the short run to make a cash settlement than to go through the steps of investigation, analysis, negotiation and potential litigation Yet by settling, companies risk tarnishing their brand and attracting other litigants with similar claims who recognize an easy way to receive a cash settlement.

The simple truth is that when companies pay tar claims that have no merit, they lose. So, what steps should risk managers take to defend the company's products from the damage at trivolous lawsuits and determine which have legitimate merit? Based on the experience of claims managers who both specialize in product liability and who have handled thousands of claims, there are seven main principles to consider.

1. Bring in a specialist. Product liability claims differ from other types of liability claims and require special handling. Many law firms and claims management firms either product liability services. For best results, companies should look for a firm with depth in a variety at product lines and industry segments, not only in managing product liability claims and litigation but also in helping to design programs to minimize exposure to product liability risks and to deal with a product recall and its associated issues.

The complexity of many product liability claims makes an in-depth understanding of the industry and the product a critical component of a successful resolution. Product liability specialists should possess highly developed product knowledge in a wide range at industries including automotive agriculture, food, consumer products, construction equipment, pharmaceuticals chemicals and medical products.

In addition, the product liability team members must possess the experience needed to manage all aspects of a claim. including: alleged design defects; failure to warn or instruct foreseeable product users; manufacturing detects associated with materials and quality control: service, repair and installation issues: and express and implied warranties and other contractual issues.

2. Agree on a philosophy for handling these claims. An appropriately aggressive approach to claim and litigation management consistent with the company's philosophy can be taken only by fostering constant communication and close collaboration with company risk management, the claims management firm and the client's legal counsel.

3. Incorporate a flexible altitude towards claims management. Flexibility is important so that the approach to a particular claim can be adjusted quickly based on the results of an investigation, the company's changing needs or other unforeseen circumstances or events. …

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