Shannon Clark shares four best practices to reduce product liability risks for manufacturers.
National 5-year and 10-year trends show an overall increase in product liability litigation since 2013, particularly in sectors like consumer goods, automobiles, medical devices, and pharmaceuticals.
From 2018-2022, an average of 5,152 cases were litigated annually, a pronounced increase from an average of 3,342 cases per year in the prior five years, between 2013-2017. Between 2018 and 2022, $214 million in total damages were approved as class action settlements, plus $201 million in punitive damages were awarded. In 2022 alone—the most recent year this data is available—5,826 product liability cases were litigated, and $93 million was awarded across 48 cases, well above the 5-year and 10-year averages.
In Arizona, product liability litigation tends to fluctuate more significantly than it does nationally from year to year. For example, in the five years between 2013 and 2017, the number of cases filed increased from 27 cases in 2013 to 2,222 cases in 2017. The trend continued in 2018 and 2019, with 2,421 cases and 3,048 cases filed, respectively. Unsurprisingly, the number of cases filed in 2020 significantly decreased to just 70, followed by 42 cases in 2021 and 33 cases in 2022.
While the number of cases filed in Arizona in the last two years hasn’t yet caught up to pre-pandemic numbers, litigation is rising again in Arizona just as it is nationally, with 123 cases filed in 2023, and 444 cases already filed in 2024.
Manufacturers can reduce their product liability risks—and the risk of becoming the target of a product liability lawsuit—by being proactive about safety concerning the products they design and manufacture, the suppliers they rely on, and the expert counsel they retain. By implementing the following practices, manufacturers can help ensure they design and manufacture safer products for consumers, and avoid spending significant time and money defending a claim and preparing for trial.
The Basics of Product Liability Claims
Product liability lawsuits are filed against manufacturers, distributors, and/or sellers of a product when a consumer is injured, killed, or otherwise damaged by a product alleged to be defective and unreasonably dangerous. These claims are most frequently brought under two legal theories: 1) negligence (alleging a manufacturer knew or should have known that the product was defective and dangerous), or 2) strict products liability (alleging that the manufacturer and all persons and entities in the product’s chain of distribution are strictly liable for distributing a product that was defective and unreasonably dangerous, regardless of their knowledge or intent at the time the product was introduced into the stream of commerce).
There are four primary categories of product liability claims:
- Manufacturing defect, where the product was built or assembled outside of manufacturer specifications;
- Design defect, where the product’s design is alleged to be defective and unreasonably dangerous, usually with safer alternatives existing;
- Information defect, where the warnings and instructions are alleged to be inadequate; and
- Breach of warranty, where the claim is that the product does not meet the manufacturer’s implied and express representations concerning the product’s fitness for its intended purpose.
Making Safe Products
Manufacturers of medical devices, drugs, automotive parts, industrial equipment, and consumer electronics are among those most often targeted in product liability claims. Here are some manufacturing best practices to help reduce the risk of making unsafe products.
- Implement Quality Control Systems
Risk Analysis: During the design phase, manufacturers should conduct risk analysis to ensure their product is designed with safety in mind. Risk analysis can include testing the design, incorporating safety features, and understanding how typical end-users will use the product. If a product might fail, it should fail safely.
Standardize Process: During the construction of the product, consistency is paramount. Manufacturers should implement standardized processes and rigorous quality assurance and quality control procedures. Check regulations and industry standards, but do not assume mere compliance with government regulations is sufficient. Government regulations are often minimum standards, not best practices.
Supplier Due Diligence: Manufacturers can be held liable for product defects when their supplier fails to meet standards. Vet suppliers and ensure they meet quality and safety standards. Conduct regular audits and compliance reviews for third-party suppliers.
- Create Clear and Comprehensive Warnings and Instructions
Craft Adequate Warnings: Consult industry standards and legal counsel to ensure your warning labels are clear and accessible for the typical user, legally compliant, and correctly translated for international or market-specific usage.
Instruction Manuals: Create user-friendly, detailed instruction manuals, and provide timely and accurate updates and amendments as product modifications or new risks emerge.
- Ensure You’re Insured
Indemnification Clauses: Including strong indemnity provisions in contracts with suppliers and distributors can protect manufacturers in the event a component of the product is defective, or the product is damaged during distribution. Qualified legal counsel can negotiate these contracts and ensure they are clear and enforceable.
Warranties and Limitations of Liability: Manufacturers can minimize exposure through effective warranty terms, including disclaimers and limitation of remedies under the Uniform Commercial Code (UCC) and other relevant laws.
Insurance: Manufacturers can further mitigate their risk with product liability and product recall insurance. Evaluate the appropriate coverage and consider any factors that affect insurance premiums for manufacturers, such as the facility's location, the type or value of the product manufactured, the number of employees, the history of claims, and industry-specific risks. For example, a medical device manufacturer will likely pay more for liability insurance than a textile manufacturer due to the higher risk of injury from a defective medical device. Many sophisticated insurance brokers specialize in product liability insurance.
- Proactive Incident and Recall Management
Monitoring for Potential Defects: Manufacturer liability doesn’t stop when the product leaves the facility. It’s important that manufacturers implement systems to track product performance. Many companies use AI to crawl news stories and social media to collect and monitor consumer feedback. In addition, monitoring litigation involving competitor products may alert you to alleged deficiencies in your own product designs that can be evaluated.
Developing a Recall Plan: Craft a well-defined procedure for handling recalls, and consider the legal and regulatory requirements (e.g., government notification) of your plan.
Crisis Management: Mitigate reputational damage by onboarding public relations and legal teams who can coordinate a response to potential claims and litigation. Consulting with knowledgeable product liability defense lawyers may also be advised.
Conclusion
The design and construction phases are the most critical for manufacturers to ensure the product or component being manufactured is safe and does not deviate from the intended design. By being proactive and implementing best practices, manufacturers can help ensure the products they design and manufacture are safer for consumers, thus mitigating the risk of product liability lawsuits, which can be crippling for manufacturers.
Click here to read Shannon's article published by the Phoenix Business Journal.
about the author
Shannon Clark is a shareholder at Gallagher & Kennedy and Co-Chair of the firm’s Plaintiffs Personal Injury Department. Shannon was named by Best Lawyers as “Product Liability Lawyer of the Year” for plaintiffs in 2022 and 2024.
In addition to his robust trial and appellate practice, Shannon advocates for clients injured by defective products, including, insulin pumps, IVC filters, hip and shoulder implants, tires, seatbacks, fuel containment systems, SUV roofs, airbags, electronic acceleration controls, firetruck ladders, consumer devices, and many others. Shannon has obtained significant settlements and verdicts for clients in Arizona, California, Florida, Kentucky, Maine, Mississippi, Montana, New Mexico, New York, Nevada, Ohio, South Carolina, Texas, Virginia, Washington, D.C., and Wyoming.