The Origins of Products Liability

Introduction

Products liability is one of the most important U.S. legal developments in the last 100 years for numerous people and entities: consumers, product-users including hospitals and health care practitioners, manufacturers and others who produce and sell products, government regulators, insurance companies who insure the defendants in these claims and lawsuits, and, of course, lawyers for the plaintiffs and defendants. This liability has bankrupted manufacturers and insurance companies, caused manufacturers to stop making and selling certain products, and created entire industries of those who seek compensation for injuries and loss, those who seek to make products safer, and those who seek to make money prosecuting or defending the parties in these claims and lawsuits. 

Negligence and Strict Liability

Products liability is the liability of someone in the chain of production or chain of distribution for personal injury, property damage or economic loss arising out of the purchase and use of a product. It includes as “users” patients, even though a health care institution or professional purchased the product and the health care professional is actually using the product on the patient. 

Generally, product-users could not sue manufacturers in the 1800s and early 1900s. The reason is that the law only allowed consumers to sue the party from whom they purchased the product. This usually was a retailer or dealer and not the manufacturer of the product. The law developed in this way to insulate the manufacturer from liability so that they could be free to innovate and develop products without a significant risk of legal liability.

The law also protected manufacturers by requiring the injured party to prove negligence or fault in order to recover. That is, they had to prove specifically which employee of the manufacturer was at fault and how they caused the problem. This was difficult in many situations because it was very difficult for the injured party to figure out what happened and who did it. This is particularly true as manufacturing became more complex in the latter part of the 1800s and into the early 1900s.

The legal concept of negligence, which has been in existence for hundreds of years, is evaluated by weighing three variables: (1) the probability that injury would result from the manufacturer’s conduct; (2) the gravity of the harm that could be expected to result should injury occur; and (3) the burden of taking adequate precautions to avoid or minimize the injury.

In other words, if the probability of harm and the gravity of the harm are greater than the burden of taking precautions to reduce the risk, then the manufacturer could be deemed negligent if they do not minimize the risk. In essence, the manufacture is negligent if the manufacturer failed to exercise reasonable care in manufacturing its product and this failure was the proximate cause of the injury.

In negligence cases, the injured party traditionally had to prove that: there was a defect in the product that caused plaintiff’s harm, the product was defective when it left the hands of the manufacturer or product seller, and that the defect was brought about through the defendant’s negligence.

The courts began to believe in the early 1900s that it was very difficult for the plaintiff to prove the last requirement— specifically how the defect came about. How could a plaintiff prove who forgot to tighten a nut on a car’s tire and caused the tire to fall off? As the manufacturing process became more complex, the courts became more liberal with the proof required for negligence.

Courts began to allow juries to “infer” that a product was negligently made if there was no other cause for it and the product was in the control of the manufacturer or seller until sale. This inference became the foundation of “strict liability.” In addition, the courts began to apply “strict liability” to cases involving food and beverage where it was virtually impossible to prove how the foreign matter got into that food or beverage.

Finally, in the 1960s, strict liability was adopted for any product, not just food and beverages. What strict liability did was eliminate the third requirement of proof for negligence. No longer did the plaintiff have to prove negligence and who was responsible for it. All they had to prove was that there was a defect and that the defect was in existence at the time the product left the manufacturers or sellers control and the defect caused the injury.

Under strict liability, the injured party did not have to prove fault or negligence and the manufacturer was liable even if their quality control and manufacturing procedures were reasonable and not negligent. In other words, even if they did not do a bad job of manufacturing the product, the product turned out defective and dangerous and it injured a consumer.

The adoption of strict liability started an explosion of claims and lawsuits because consumers began to understand that they could more easily recover against manufacturers and, most importantly, they could find lawyers who were willing to take their cases and sue.

Products Liability Explosion

The number of lawsuits significantly expanded in the 1970s and 1980s. Also, the theories of liability significantly expanded. Strict liability, which was originally intended to apply only to manufacturing defects, began to be applied to defects in design and warnings and instructions. Warranty claims and lawsuits based on breach of contract, which had always been available, significantly increased.

In the mid-1980s, the cost of insurance skyrocketed and the number of lawsuits soared. Since the mid-1990s, the number of lawsuits has not increased as fast and may even have reached a plateau. The reasons for this are unknown but are probably attributable to safer products, the high cost of prosecuting a products liability case combined with the high success rate of defendants at trial, and more conservative courts and juries. 

Despite this development, products liability is as dangerous as ever. The threat of punitive damages is still real and when a jury awards damages in a serious injury case, they can be significant. The threat of losing compensatory and punitive damages plus the high cost of defending cases results in more than 95% of all cases being settled or otherwise resolved prior to trial.

In addition, there are new threats. Plaintiffs are now banding together to file class action lawsuits where there has been some injury, a possible injury, and even in no-injury situations. This has become very popular with medical devices and pharmaceuticals. Additionally, the geographical breadth of products liability law has expanded, and almost every industrialized country in the world, plus some developing countries, has adopted some sort of products liability law. Most of these laws use some concept of strict liability. While not as “strict” as the law in the U.S., the threat of foreign lawsuits still exists and can cause big problems in U.S.-based litigation. 

Regulatory Agencies

This litigation explosion, which started in the early 1970s, was accompanied by the establishment of government regulatory agencies whose charter included product safety and monitoring the safety of products in the field. In 1976, the Food and Drug Administration was given more power in safety and imposed a responsibility on medical device manufacturers to report safety problems and possibly recall their products.

Also, most industrialized countries have laws similar to those in the U.S. concerning device approvals prior to sale and include some responsibility to report product safety problems to foreign governments and possibly withdraw products from the market.

Defects

Products liability focuses on defects in products that exist at the time of sale. Over the years, there have been three clearly defined kinds of defects. 

• Manufacturing Defects

A manufacturing defect exists if the product “departs from its intended design even though all possible care was exercised in the preparation and marketing of the product.” In other words, even if the manufacturer’s quality control was the best in the world, the fact that the product departed from its intended design meant that it had a manufacturing defect. Moreover, the plaintiff need not prove that the manufacturer was negligent, just that the product was defective. The focus is on the product, not on the conduct of the manufacturer.

Common examples of manufacturing defects are products that are physically flawed, damaged, incorrectly assembled, or do not comply with the manufacturer’s design specifications. The product turned out differently from that intended by the manufacturer. If that difference caused injury, the manufacturer will be liable. There are very few defenses.

Design Defects

Design defects are very different. With manufacturing flaws, usually there are only a handful of products that have the problem. And it usually is proven that someone made a mistake, or was negligent. 

With design defects, it is different. The manufacturer intended for the product to be designed and manufactured in a certain way. And the product turned out the way it was designed. The problem was that there was something deficient with the design. 

A product is deemed to be defective in design if a foreseeable risk of harm posed by the product “could have been reduced or avoided by the adoption of a reasonable alternative design” and the failure to use this alternative design makes the product not reasonably safe. With this definition, the jury believes that the product could have been and should have been made safer.

An alternative definition used by some courts is that a product is defective in design if it is dangerous to an extent beyond that which would be contemplated by the ordinary consumer.

These tests are much more subjective than the test for manufacturing defects and this subjectivity is the cause of most of the problems in products liability today. Manufacturers cannot easily determine how safe is safe enough, and cannot predict how a jury will judge their products based on these tests. It is up to the jury to decide whether the manufacturer was reasonable or should have made a safer product.

• Warnings and Instructions

The third main kind of defect involves inadequacies in warnings and instructions. The definition is similar to that of design defect and says that there is a defect in warnings if foreseeable risks of harm posed by the product “could have been reduced or avoided by …reasonable instructions or warnings” and this omission makes the product not reasonably safe.

Again this is an extremely subjective test that uses negligence principles as a basis for the jury to decide. As with design, it is difficult for a manufacturer to know how far to go to warn and instruct about safety hazards of the product.

Post-sale Duties

One other theory of liability that is very important in a products liability case involve post-sale responsibilities. A manufacturer or product seller may have a duty, after sale, to warn customers about hazards the manufacturer learns about after sale. This duty can arise even if the product was not defective or hazardous when sold. This duty is clearly based on negligence and involves any of the three kinds of defects described above.

Chain of Distribution – Liability of Commercial Sellers or Product Distributors

The law of products liability applies to every entity in the chain of production and distribution. This starts with the raw material and component-part suppliers and, in the case of many medical devices, ends with the healthcare professional or healthcare facility. 

While every entity that supplied raw materials and component parts to a final product may be liable in products liability, as a rule, such sellers are not liable when the component or raw material is not defective. To impose liability there would put an undue burden on such suppliers to scrutinize another’s product that they had no part in designing or manufacturing.

In the normal situation, a final product manufacturer (“OEM”) buys raw materials and component parts from manufacturers and sellers without disclosing what they are to be used for. The OEM may supply specifications to such sellers, but usually the seller does not know how their product will be used. And they generally have no duty to ask.

However, there is an exception to this general rule of no liability when the supplier participates in the selection of and integration of the component or material into the design of the product, and this selection or integration causes the product to be defective and to cause harm. Thus, the supplier really becomes part of the OEM’s design team and is rightfully subject to liability for giving bad advice that results in a defect and injury.

The other exception to the general rule of no liability is when the component is defective and that defect causes harm. The defect can be any of the three main defects – manufacturing, design, or warnings and instructions. These kinds of cases can get very complex since the OEM and part supplier will fight over who knew what and who was at fault.

Healthcare professionals can certainly be sued for injuries caused by medical devices. The claim could be that the professional was negligent in prescribing or using the device on the patient. The professional does have a defense where they relied on the device manufacturer’s information in prescribing and using the device. However, it is a question of fact for the jury as to whether the professional followed this information or deviated from the instructions provided by the manufacturer. Therefore, the professional, as well as the healthcare facility and their employees, may be parties to the lawsuit.

Defending medical-device cases can be very complex because there are usually many parties involved and each of them will most likely try to blame someone else in the chain to deflect their own liability.

Conclusion

Cases involving medical devices have increased significantly as more complex devices are being developed and as the use of devices have expanded to home health care situations. This makes it even more important for device manufacturers to proactively evaluate their risk and implement preventative procedures to minimize the risk of products liability, regulatory liability, warranty liability and contractual liability. These preventative procedures, which will be discussed in subsequent articles, may even exceed regulatory requirements. Since compliance with FDA requirements is not usually a defense in a products liability action, the manufacturer must consider the common law and endeavor to meet or exceed those requirements.

Kenneth Ross

Kenneth Ross is Of Counsel to the Minneapolis office of Bowman and Brooke LLP where he practices in the areas of product safety and liability prevention and advises manufacturers, product sellers and insurers on ways to identify, evaluate and minimize the risk of products liability and contractual liability. These guides do not constitute legal advice and are very general. You should consult competent legal counsel or Medmarc Loss Control before acting on any of the information in these guides.