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Pointing Fingers: Who’s Liable When a Defective Product Causes Harm

PA swift and thorough product recall is the best way to mitigate any legal liability risk from a defective product, removing inventory from the market before problems become pervasive. But in many cases, product defects or dangers aren’t discovered until after harm has occurred and liability cannot be avoided.

Product liability laws enable consumers to sue those parties responsible when a product causes property damage, injury or death. Failure to remove a dangerous product in a proper and timely way opens vendors to penalties from government regulators.

The product manufacturer is usually the responsible party in most recalls. But in some cases, any seller of a product is liable for losses, injury or damage caused by a defective product. This liability can extend to suppliers, distributors, retailers, and others in the distribution chain.

Retailers are particularly vulnerable. They have a legal responsibility to sell products that are safe, and have a duty to inspect products for potential problems before putting them on store shelves, otherwise they could be liable. They must also do their part in removing recalled products from their inventory.

Some less scrupulous retailers may sell a product it knows is defective, committing an illegal act. There have been numerous incidences of the Consumer Product Safety Commission (CPSC), Food and Drug Administration (FDA) or other regulatory body issuing a recall on a product while the retailer failed to remove them from store shelves.

There is also the issue of retailers who private label certain products. While they are not the manufacturer, they have the obligation to ensure their manufacturing partner is meeting all necessary quality control, certification, packaging, safety and other federal standards. This oversite requires frequent audits of the manufacturer’s facilities and processes.

Other times a retailer may actually be the cause of a product defect. Take, for instance, a properly produced food product that was improperly handled or stored by the retailer, causing the product to spoil and pose dangers to consumers. The retailer would be liable for the harm it causes in these cases.

Distributors and wholesalers are at risk as well. They can be held liable if their distribution of a product includes any kind of service or installation work that introduces a post-manufactured product threat. It can also occur if they modify or repackage a product, or distribute it under their own private label.

Distributors can be held accountable when malicious tampering of product occurs under their watch, or when some kind of unintentional defect is introduced during their packaging, storage or shipment of the product. Or, as with retailers, they could be liable if they simply mishandled the product that spoils while in their care.

Distributors/wholesalers that import foreign made products are considered to be the manufacturer once they reach the U.S. in some cases, and thus assume a manufacturer’s liability risk. This is particularly applicable when the distributor/wholesaler played a hand in designing the product.

Lastly, partners in a product’s supply chain could be liable if the defect or danger stems directly from their component. Liability rules for parts suppliers vary from state to state. For example, California stipulates that a manufacturer of a completed product cannot escape liability by tracing the defect to a component part supplied by someone else.

However, if a plaintiff can trace harm or damages to a defective part from a supplier, he or she has a viable claim against both the manufacturer and the part supplier. Similarly, a manufacturer being sued for a defective product may turn around and sue the supplier if it believes the component was the underlying cause. The supplier could also be liable if it participates significantly in the design and integration of the component into a finished product that causes harm. 

Risk extends to material suppliers as well. If a raw material is contaminated or misformulated, the supplier could be held liable if it fails to warn the manufacturer.

Whichever party is at risk, the best way to mitigate its liability is by being prepared to address the problem quickly. In-house legal teams within these organizations should work with an expert partner to have a recall plan ready before an event arises so they can contain as much of the fall-out as possible.

Working with a trusted recall partner benefits in-house legal staff by giving them outside resources to handle the execution, deal with regulatory bodies, and free up internal resources to correct the issue and get back to business.

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