Business Law and Product Liability

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Product liability law has evolved from two bodies of law: contracts and torts. Contract law provides the rules for ascertaining the legal responsibilities of parties to formal agreements, including contracts for the sale of goods. Tort law provides the rules for determining whether a person has acted negligently towards someone to whom he owes a duty of case, independent of any contract and whether that negligence caused injury or property damage to others.

Personal injury law includes the recovery of compensation in relation to injuries and medical conditions in a broad range of compensable situations. Personal injury law is divided, broadly speaking, into common law and statutory schemes, such as Workers Compensation and Victims Compensation. Manufacturers of defective products could be liable in contract despite the absence of a formal contract or a showing of negligence. Today, it is common practice for injured persons to rely upon all three theories — strict liability, implied contract warranty, and negligence resulting in a tort when they sue. Raising all three legal theories maximizes the potential for injured persons to recover punitive damages awarded because a manufacturer grossly abused his duty to provide a safe product. It also increases the chances of overcoming manufacturer defenses because some defenses apply only to one legal theory and not to another theory.

The absolute facts are that product manufacturers, from cigarettes to firearms are being held accountable for the relative safety of their products. Attorneys general from all but four American states unveiled a $206 billion deal with tobacco companies to settle all lawsuits against them (When lawsuits make policy, 2003). The impetus in these consumer-oriented lawsuits is to compel manufacturers to do their utmost in protecting consumers, and ultimately themselves. Along those lines, a number of cities throughout the country, including Philadelphia and Chicago, are considering bringing innovative suits against manufacturers under a nuisance theory, based upon the tobacco lawsuit model.

Defects in products include design defects, manufacturing defects, and instructional defects, such as inadequate labeling, instructions for use, or warnings that render the product dangerous. Defects may therefore be introduced into products throughout the chain of manufacture and distribution. There are some significant variations in the standard from state to state. Some states have rejected the “unreasonably dangerous” test and only require that the injured person prove that there was a defect in the design and that the defective product caused the injury. (Committee on Energy and Commerce, 34-39) In West Virginia, on the other hand, the standard employed is whether the product was not reasonably safe for its intended use based upon what a reasonably prudent manufacturer’s standards should have been at the time that the product was manufactured.

There have been a number of liability suits against so-called negligent gun manufacturers, dealers, and owners, brought by the Legal Action Project. Dix vs. Beretta, recently decided in Alameda County, California was one of these. U.S. courts today recognize that manufacturers are “strictly liable” for personal injuries caused by defects if their products are generally or inherently dangerous. (Golovin, 74-80) For such products, the courts have recognized that the price to all consumers should include the cost of compensating those who are injured when the products have defects. This means that an injured person does not need to establish a formal legal relationship with the product manufacturer. It also means that the manufacturer can be held liable without a showing of negligence. This was not always the case.

Design defects are potentially dangerous errors in the whole product line that are present in it before it is even made. Manufacturing defects are errors in the product while it is being constructed, such as inadequate materials. Defects in marketing are errors in instructions and failure to warn the consumer of the possible dangers in using the product. In a recent case, Firestone Tires, Inc. had to recall about 6.5 million tires due to a design flaw and the rubber manufacturing process in an Illinois plant. There were more than two hundred fatalities and over seven hundred injuries reported from a particular model of tires, which were used on Ford Motor Co.’s automobiles, primarily the Ford Explorer. Ford had recommended using lower tire pressure and heavier load level than is safer for some particular models, which in turn were the cause of most of the accidents.

The more recent and more serious objection to SUVs, however, involves the perception that SUVs are unsafe and even “defective” because they are prone to rolling over. Trial lawyers have helped to foster this perception; The Bridgestone/Firestone-tire debacle this past summer has led to more than 100 lawsuits alleging that SUVs are dangerously unsafe. The lawyers have painted bulls’ eyes on the Ford Explorer in part because of its popularity as America’s best-selling SUV and in part because the vast majority of last summer’s Firestone-tire-related rollover accidents involved Ford vehicles. This fact made the Explorer an easy target.

However, if the claims are valid, other SUVs–and the manufacturers of those SUVs–will be similarly vulnerable, as most SUVs share a number of common design characteristics unique to these types of vehicles. So the question becomes: Is the Ford Explorer dangerous or defective, beyond the inherent limitations imposed by sport utility vehicle design characteristics? The evidence-and it is abundant–overwhelmingly says no. Even so, the principal concern involves SUV occupant safety. In short, the FARS/IIHS data tell us a number of things about SUVs. Most important, they are comparatively safe. Taking a relative handful of accidents–some 200 tire separation incidents involving Ford Explorers–out of context distorts the overall safety record of these vehicles. But one aspect of the debate about the safety of SUVs–and in particular the issue of rollover accidents–continues to be left largely unexplored and unexplained, lending credence to the accusations made by lawyers and other anti-SUV partisans.

It is that as a matter of vehicle dynamics, SUVs are, indeed, easier to roll than most passenger cars–under certain conditions. However, this fact does not make them unsafe or defective. At first glance, the above statement might sound contradictory. If SUVs are more prone to rollover accidents if they are less stable than typical passenger cars, doesn’t that make them, ipso facto; “unsafe” even “defective”? It’s worth mentioning that before SUVs became mass-market items, when they were driven almost exclusively by people who understood and respected their limitations, “rollover” accidents were not an issue and no one questioned the basic safety of SUVs as a vehicle class. Only since the advent of the “soccer mom” SUV driver have questions been raised on this score. Without diminishing the losses suffered by those involved in SUV rollover accidents, it must be pointed out that Ford sells about 450,000 Explorers every year and has done so for many years. Yet of that vast number of Explorers, only a small handful–some 200 overall–have been involved in rollover or tire separation accidents.

Yet despite the evidence, lawyers and anti-SUV groups continually downplay Explorer’s excellent overall safety record– as well as the idea that people involved in SUV accidents may bear at least some of the responsibility for their woes. The anti-SUVers appear more interested in whipping up fear and hysteria about vehicles that are perfectly safe–if driven appropriately and within the limits of their design.

By manufacturing a faulty product that causes harm or death to a customer, the company causes much distress and anguish to the victim and those close to him or her. It can destroy families, along with severely damaging the emotions and stability of each individual affected by the loss. The effects on a company if they are proven to have distributed a defective product that caused harm can be devastating. (Goodman, 56-62) Depending on the severity of the results of the defect, the company may be sued for large amounts of money. For example, Donna Bailey, 44, of Portland, TX was paralyzed from the wasted down in an accident involving Firestone tires on a Ford Explorer. She filed a lawsuit against both companies wanting almost $90 million for physical and emotional damages caused to her by the defective tires. She won her lawsuit, and though the two companies did not have to pay the full $90 million, they still suffered a very large financial loss. The final amount Bailey was awarded was not released. (Hodapp, 118-23).

The company then not only must pay any lawsuit filed against them but must also finance a recall of all defective products. The cost of the Ford and Firestone recall, in addition to the millions lost in lawsuits and court fees, is estimated between $719 million to $2.7 billion. (Product Liability Daily, 17-18) The total loss of the two companies would put most companies out of business, but since both companies have been incredibly successful they have the funds to pay. Moreover, the company will not only suffer from financial losses but the company’s reputation will also be tarnished. Both Firestone, Inc. and Ford Motor Co. have been very reliable names in their respective industries since their businesses were started, but many consumers will be reluctant to buy their products due to the number of deaths and injuries that were caused by their recent mistakes.

Works Cited

Goodman, Walter. All Honorable Men. Boston: Atlantic Monthly Press, 1963. 56-62.

Golovin, Jonathan. “Best Practices’ Makes Perfect.” Manufacturing Systems, 1996: 74-80.

Hodapp, Paul F. Business, Ethics, and the Law. New York: University Press, 1991. 118-23.

Product Liability Daily; When Lawsuits Make Policy: (2003). The Economist, 17-18.

United States. Committee on Energy and Commerce. Filthy Food, Dubious Drugs, and Defective Devices: The Legacy of FDA’s Antiquated Statute. Washington: GPO, 2001. 34-39.

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Business Law and Product Liability

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