There are few bad dreams that rival the nightmare of product recalls and product liability claims. But for manufacturers and others that continually confront risk along the product supply chain, the issues surrounding product safety and liability are of paramount concern. Product recalls are escalating. Apprehension about product safety continues to grow - particularly about products and components that are sourced from Asia. And the cost of product liability goes beyond rising claims, litigation, loss costs, and the effort required to effectively manage recalls - the reputations of brands, companies, segments, and manufacturing in general can be tarnished by product safety and quality concerns.
Fortunately, product liability and product recall nightmares largely can be avoided. Prevention starts with good products - producing safe products with zero defects is an attainable goal. Product liability and litigation are controllable and preventable. Manufacturers - and companies that source from overseas manufacturers - can institute strategies, processes, and procedures that improve product quality, mitigate product liability, comply with government regulations, and in the process decrease the likelihood of recalls and litigation. Even the risk of overseas sourcing can be mitigated through careful qualification of suppliers and rigorous testing protocols.
The common causes of product safety deficiencies that lead to escalating product safety recalls
How to shift their organizations focus from reactive product recalls to proactive product liability prevention
How to create awareness of comprehensive product safety and liability prevention processes and best practices
What are the implications of Consumer Product Safety Improvement Act of 2008
What are the resources and best practices involved with managing voluntary product recalls
Defending a Products Liability Lawsuit
Manufacturers have no intent or desire to introduce harmful products into the marketplace. In addition, regulation of these companies is intended to ensure that only “safe” products are brought to market. Despite this combination, manufacturers and distributors are routinely sued for alleged defects in products that purportedly injure consumers. What follow is a brief explanation of the theories on which products liability suits are most often based, and a few of the defenses against such suits.
The Doctrine of Strict Liability is at the heart of many products liability lawsuits. The application of the doctrine means that the manufacturer need not have been actually been negligent in order to be found liable for harm resulting to a consumer from use of the device. Instead, the doctrine imposes on the manufacturer/distributor a duty to ensure that the product is safe, and thus takes any harm that results from the product’s use to mean that the manufacturer/distributor failed in that duty. A plaintiff choosing to pursue a strict liability case may allege a defect in the manufacture or design of the product or a failure to warn of the danger in the use of the product.
Under a negligence theory, the plaintiff focuses on the same product defects described above and asserts that the manufacturer/distributor had a duty of due care to act as a “reasonably prudent” manufacturer or distributor of products and failed to do so, resulting in injury to the plaintiff.
Defenses to a Products Liability Lawsuit
The initiation of a products liability suit against the manufacturer may be devastating, and raises concerns over the costs of litigation, potential regulatory action, and the impact on product marketing. Of immediate concern may also be how best to defend the suit. The following outlines several defense strategies frequently used by manufacturers and distributors, depending on the facts that give rise to the claims against them:
Statute of Limitations.
Preliminarily, the seller or manufacturer should look at the date of the alleged injury. There are often statutory requirements that an injured consumer files a lawsuit within a prescribed time, and if this time is exceeded, the lawsuit may be barred.
Occasionally, plaintiffs sue the wrong manufacturer. Several manufacturers may produce a product, and there may be issues as to whether the particular manufacturer named in the lawsuit was the manufacturer who actually made the product that caused the consumer harm.
This doctrine applies in failure to warn cases and provides that a drug or medical device manufacturer have no legal duty to warn consumers of potential harmful side effects if that information has been communicated to a “learned intermediary.” The most common example of such an intermediary is a consumer’s physician.
Misuse and Alteration.
First, a manufacturer or seller may not be liable if the use of a product was contrary to any express and adequate instructions or warnings accompanying the product—a misuse. Second, a manufacturer or seller may be exonerated from liability where a product is altered after leaving its hands. For this defense to apply, both the misuse and alteration must not have been foreseeable by the manufacturer.
Do Distributors Require Professional Liability Insurance?
Francis A. Stockwell August 31, 2011
Question: Do distributors require professional liability insurance coverage in addition to products liability insurance coverage?
Answer: No, at least not “professional liability” coverage as it has been understood traditionally. The actions or omissions of sales representatives when acting in the scope of their employment should all be covered as part of the medical device company’s products liability insurance coverage. Such circumstances include when sales reps: (1) provide product consultations; (2) make device technical adjustments; (3) are present in operating rooms during surgeries to answer questions deemed essential for patient care; or (4) are present during patient monitoring visits to ensure clinical trial protocol compliance by surgical staff and nurses. Products liability insurance, when written correctly, will provide the company and its sales reps with protection in the event that a sales rep is named in a malpractice action.
Because sales reps frequently enter clinical settings such as operating rooms, sales reps may become the center of attention when patients experience unexpected or undesirable outcomes. Frequently, statements made by sales reps to customers result in problems for companies and raise the issue of insurance coverage. There is a popular misconception that a sales rep’s presence in an operating room or physician’s office to observe the use of the product constitutes the performance of medical services and, therefore, creates professional liability exposure. Sales reps, however, do not provide medical services. They are not licensed medical professionals and are in fact prohibited from having direct patient contact. Consequently, the sales reps of medical device companies do not need to procure separate or supplemental professional liability insurance coverage and their activities are covered under a company’s products liability policy.
To translate this more specifically into insurance terms, a products liability policy is intended to cover persons acting under the direction, control or supervision of the named insured, be they employees or independent sales representatives (“1099 contractors”). The personal acts or omissions connected with the sale, loan, lease, or delivery of any medical device, instrument or drug sold, handled, distributed or disposed of by the named insured are not construed to be medical professional services, but fall instead within the products liability policy’s definition of the “completed operations hazard” and “your work.”
Francis A. Stockwell, III is the Vice President and Chief Underwriting Officer for Medmarc Insurance Group
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