Watch Yourself: Is Your Business Prepared for Product Liability Issues?

Business.com / Starting a Business / Last Modified: February 22, 2017

Sometimes, it can be tempting to rush the process to earn the first dollar, but this can come back to haunt you.

Launching a new product, whether you’re starting a new business, or expanding your current line, is an equally exciting and frightening time.

There’s so much that goes into research and development, marketing and promotion and production.

Sometimes, it can be tempting to rush the process to earn the first dollar, but this can come back to haunt you, and possibly even destroy your business.

The U.S. Consumer Products Safety Commission (CPSC) issues recalls for products, but companies also have the option to voluntarily recall products.

The CPSC has jurisdiction over more than 15,000 products. Looking at injuries and deaths associated with nursery products among children younger than age five, in 2014 there were an estimated 69,300 injuries treated in emergency rooms, that were at least associated with, but not necessarily caused by, nursery products.

Related Article: The 8 Types of Insurance Your Business Actually Needs

Falls account for two-thirds of those injuries, involving cribs/mattresses, strollers/carriers, and high chairs.

From 2010 to 2012, 311 deaths were associated with nursery products.

Scary, isn’t it? Large corporations can usually make a comeback after a product recall, but that’s not always the case.

Take for instance, Topps Meat Company. They had to recall 21.7 million pounds of frozen ground beef patties as a result of suspected E.coli contamination.

After 67 years in business, they filed for bankruptcy in November 2007, two months after the recall was issued.

Forty people died across eight states, and 21 others were hospitalized. The company laid off employees, but wasn’t able to avoid a complete shutdown. The name was sold to Hickory Foods in 2008.

Be Proactive, Not Reactive

If you wait until you’ve got someone ready to sue you for a product liability issue, you’re taking a huge risk.

The best thing to do is be proactive, taking steps to prevent a case from ever coming to light.

Richard Weaver of Weaver Injury Law Firm says, "The most important thing a business can do is to test and work hard to eliminate dangerous elements to products wherever possible.

Whenever that is not possible, it is important to disclose potential issues that could arise and help consumers to understand dangers associated with a product.

We have seen the number of cases involving product liability rise sharply over the past five years, but companies can avoid these lawsuits by doing the right thing and notifying the public and being proactive about product recalls so that they can avoid tragedy before it occurs.”

Invest in proper research and development.

Take the time to make sure the product is going work the way you intended, and is designed to reduce the risk of injury.

Include any necessary warnings on the product packaging and instructions, as the lack of warnings can leave you open to litigation if someone gets hurt.

Test the product under a variety of normal use circumstances, to make sure it withstands use.

Conduct a litigation risk assessment.

Everyone, you, your suppliers, wholesalers, and even the retailers may be found liable for damages. The statutes are set at a state level, and anyone in the stream of commerce is vulnerable.

Related Article: To Outsource or In-house: When Outsourcing Works Best for Startups

A litigation risk assessment, also known as a risk audit, takes a look at current data to find where litigation risks are.

By identifying potential risks, and understanding their scope and nature, you can devise a plan to reduce, or even eliminate some of the risk. Ideally, this should be done before the product goes to market, when you can make changes to labeling and documentation.

Conducting an assessment, however, is not a guarantee your product will never be subject to litigation.

Establish a quality control procedure. Because all aspects of the commerce chain are susceptible to lawsuits, it’s important everything goes through a strict quality control procedure.

It’s better to avoid sending out a faulty product and letting it potentially reach a consumer than it is to let everything that comes off the assembly line go to the public.

Exactly how you manage your quality control will depend on a number of factors, including your products, industry, and associated legalities.

For instance, federal law mandates certain quality control monitoring procedures with pharmaceuticals that aren’t seen in other industries.

What to Do if You Are Sued

Don’t panic. Talk to a product liability lawyer right away. These cases are always complex in nature. The plaintiff must prove beyond a reasonable doubt they were injured or suffered losses as a result of a product that was defective.

They must also prove the injury or loss occurred in spite of using the product correctly, for its intended purpose.

Depending on the circumstances of the incident, your company may be able to provide proof that one or all these key points were not followed. Usually, there are medical records and expert testimony involved.

Your attorney or legal team will advise you on the best course of action based on the circumstances of the case.

Always follow their guidance, and if you’re unsure of any moves, talk to them before doing or saying anything.

Before consulting with an attorney, make sure to gather any kind of documentation to support your case, such as proof of quality control and safety testing.

Be prepared to follow up with additional documentation and support as required and dictated by the legal counsel. If you have product liability insurance, let your attorney know, and be prepared to speak with an insurance agent.

Protecting your business needs to be a priority in all areas, from product liability to data security, and beyond.

Related Article: The 8 Types of Insurance Your Business Actually Needs

There’s a lot of risk in operating a business in any industry, so do everything you can to minimize it for everyone, including your customers.

*The information presented in this article is for general purposes only, and should not be constituted as legal advice. Only a licensed attorney can provide guidance, and any questions about liability regarding products and services you provide should be directed to an attorney in your area.

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