The First 90 Days of a Product Liability Claim

Success depends on a quick and thorough response. Are you ready?

April 17, 2016 Photo

Product liability claims involve a myriad of products ranging from airplanes, to coffee makers, to component construction materials and parts. However, the legal basics are generally the same for all product liability claims: the plaintiff is injured from the use of a product and, as a result, sues the product manufacturer, supplier, and/or retailer of the product.

In the U.S., the causes of action that most commonly are pursued for product liability are negligence, strict liability, breach of warranty, and various consumer protection claims. The majority of product liability laws are determined at the state level and vary widely from state to state. Each type of product liability claim requires different elements to be proven to present a successful claim. However, there are basics that apply to nearly every jurisdiction. In most states, the claims of manufacturing defect, design defect, or failure to warn are not legal claims in and of themselves, but are pleaded in terms of the theories of strict liability, negligence, and breach of warranties.

Regardless of what type of claim it is, there are universal strategies that can be employed to effectively and efficiently defend and manage product liability claims. Here are the keys to successfully handling a product liability matter during the first 90 days of a claim.

Claims Handling Perspectives

It is essential that the claims professional respond to the claimant and, simultaneously, conduct an investigation of the claim as soon as possible upon receipt of the claim. Any delay—even a few days or weeks—can make the difference in the defense of the claim and the ability to obtain necessary evidence.

The three issues that should be investigated include learning and understanding the scope and type of the insured’s business and the background of the product itself; the anticipated reasonable use of the product; and the issues involved in the incident. If defense counsel is not brought in immediately, it is minimally recommended that an engineer be retained to assist with and conduct an inspection of the incident scene as soon as possible.

In addition to the scene itself, if the product at issue is available, it should be inspected, even if it is just an exemplar product. An expert can help preserve and store any evidence, as well. The designs for the product and any written materials about the product also are needed for an early understanding of the claim and to determine any potential defenses. Therefore, a team of experts, including an engineer and an accident reconstructionist, often are required.

Once the initial investigation is conducted, obtaining an understanding of the claims history of the product is very useful for an effective defense. Research with the insured should be conducted on complaint frequency and severity, and whether a complaint has been reported to any official agency. In addition to any prior, similar incidents, the claims professional should look for information regarding any design changes and work with defense counsel to assess the legal impact of these changes, depending on the jurisdiction. It is important to determine if the product was altered in any way after it left the insured’s control.

In addition to having an understanding of the incident and the product and its background, the claims professional also should be sure to conduct an early evaluation of the damages alleged. This may include evaluation of medical records as well as expert reports or photographs. The claims professional also may need to retain additional experts at the outset to evaluate the loss claimed. Depending on the specifics of the claim, the damages portion may be the less intensive portion of the claims analysis, but it is important that the claims professional weigh the information available early on regarding damages to ensure that proper reserves are set and that all necessary persons for the defense team are engaged.

Of utmost importance, however, is the coverage investigation and evaluation by the claims professional. This evaluation should consist of a review and understanding of the terms of the policy and the parties involved in the incident, as well as any coverage issues that may arise in the claim. During this early assessment, it is important that the claims professional issue a written reservation of rights related to the defense, if applicable, to ensure that the insured is aware of any potential coverage limitations.

Early Resolution Strategies

Any time a claim is made, it is critical to conduct an analysis of all possible contributing parties and to seek their participation from the outset. Often times, responsible parties such as suppliers, distributors, or other joint tortfeasors are not sued by the plaintiff for strategic reasons. Depending on the jurisdiction, there may be a claim for “contribution.” This is a claim brought by one defendant against another jointly liable person or party in an effort to recover some of the monetary damages that may be incurred. With some limitations, contribution allocates fault by percentage among the responsible parties. “Indemnity,” on the other hand, seeks to shift the entire loss from one party to another.

Jurisdictional laws differ on how these concepts apply. In Alabama, for example, there is no contribution among joint tortfeasors. If a defendant bears any fault, it could be liable for 100 percent of a judgment. Other jurisdictions allow a percentage of fault to be assigned to a defendant, which represents the percentage of a judgment for which it is responsible. Indemnity claims frequently are based in contract, but some common law claims exist, as well. A thorough analysis of potentially responsible parties and consulting with counsel to clarify a jurisdiction’s rules on allocation of fault will assist with assessing the potential for transferring risk.

Early budgeting also can help identify the optimal time for resolution of a case. Unless there is a strong liability defense, often it helps to reach out to plaintiff’s counsel and discuss the plan for moving forward. Inevitably, if plaintiff’s counsel is interested in resolving the case, she will bring that up in the course of discussion. Asking what she thinks is the ideal time to talk resolution often is a great segue to settlement discussions. From that point, a budget can be developed from inception to the optimal resolution stage, and then through trial. This optimal resolution point differs from case to case and depends on a number of factors, such as pre-litigation investigation; cost of defense and costs for the plaintiff; the amount of damages; and the personal motivation of the plaintiff.

Finally, when considering early resolution, it’s important to think about defense costs versus indemnity costs. Certainly there are cases that need to be tried, such as those where the exposure far outweighs the cost of a resolution. Depending on the product involved, this may be part of a larger strategy of handling a portfolio of litigation. Often, it pays to pick the very best cases from a defense standpoint to take to trial in order to establish a series of victories on particular types of claims. However, in many cases, the cost of defense can be a factor. If a case that would cost $200,000 through trial can be resolved for $50,000—and there is some true liability potential—it can be a smart business decision to do so early on.

Experts and Venues

Whether an in-house expert or an outside expert witness is needed, careful consideration must be given before retaining an expert witness. Counsel should meet, interview, and evaluate the prior testimonial experience, qualifications, and knowledge of any expert witnesses prior to identifying them for trial.

A good expert witness should have nonlitigation experience with the subject product, be likable, be a good teacher, and understand that juries are persuaded not only by conclusory opinions of the expert, but also by demonstrative evidence and exhibits that persuade the trier of fact to accept the opinions offered by the expert. In-house experts need to provide the jury with the company’s due care story relative to the product. In-house experts also need to be prepared to explain any prior complaints that a company has received regarding the product, along with an explanation as to what the company does with the customer complaints and any investigation that is conducted into those complaints.

It’s also important to consider the impact of venue and forum. Is there diversity of citizenship between the parties that would allow the case to be removed to federal court? If so, the defendant has only 30 days from service of the complaint to do so. Is there a subsequent remedial design change that may be admissible in the state court but not in the federal court? Are there factual findings of a government investigative agency that may be admissible in the federal court but not in the state court? Is there habit evidence that may be admissible in the federal court but not in the state court? Is there an expected Daubert challenge to the plaintiff’s anticipated expert testimony? Generally, federal courts are more conservative than state courts in terms of the evidence that is considered inadmissible.

Is there a higher quality of judges in the federal court than the state court? Do you risk having the case assigned to a very plaintiff-oriented judge if the case is removed to the federal court? In the event that there is an unusual legal issue, will the federal appellate court be more or less favorable to the insured than the state appellate court? In the federal court, a unanimous jury verdict is required in order for a judgment to enter. What is the requirement in the particular state court for the number of jurors to render a plaintiff or defendant verdict?

The various obstacles and complications that may arise depending on venue and forum can be significant and should not be overlooked. Consultation between the claims professional and defense counsel can prove invaluable when it comes to wading through the pitfalls that each case may face. However, this analysis can and should be performed as early on as possible in the claims process.

Early Investigation and Documentation

An insurer should consider retaining outside counsel and consulting expert witnesses early on in the claims process for any serious product liability case. Experienced product liability counsel can direct the pre-suit investigation into the claim; the initial inspection of the subject product and an exemplar product; recommend outside experts; advise and consult regarding any proposed product testing by the plaintiff; and evaluate the client risk and probability of success if the case is defended through trial. In addition, attorney-client privilege and work product protections can be attached to the early investigation process in many instances.

The plaintiff’s medical records often are some of the most important evidence in a product liability case. They contain descriptions by the plaintiff of the accident itself, toxicology screens regarding any drugs taken by the plaintiff at the time of the accident, a list of the prescription medications that the plaintiff was taking at the time of the accident, detailed descriptions of the injuries suffered by the claimant that can assist counsel and defense experts in reconstructing the accident, prior medical history including injuries suffered by the plaintiff, and relevant information regarding the medical damage aspect of the case. All plaintiff’s medical records, including imaging studies, should be obtained and reviewed by outside counsel.

Documentation also can be crucial when it comes to creating the strongest defense of claim. During the investigation process, the following documents should be gathered and reviewed:

  • All federal, state, and local government reports regarding the accident, including police, fire, ambulance, Occupational Safety and Health Administration, Consumer Product Safety Commission, National Highway Transportation Safety Administration, and any other government agency reports.
  • All photographs available from the plaintiff regarding the product and the accident scene.
  • The owner’s manual, the service and installation manual, the warnings and the instructions on the product, and the sales history and maintenance and warranty history of the product from the manufacturer and third parties.
  • Any service bulletins or recalls for the product.
  • Prior claims and lawsuit history of the product to understand whether there are any substantially similar claims against the manufacturer.
  • Applicable government regulations and any industry standards that apply to the design and manufacture of the product.
  • The workers’ compensation insurers’ claims files, automobile insurer’s files, and homeowners’ insurance files in order to obtain statements made by the plaintiff or witnesses as to how the accident occurred.
  • The design and warnings on competitors’ products in the industry relative to the timeframe when the subject product was designed, manufactured, and sold and subsequent design changes up until the time of trial.

Pre-Litigation Technical Conference

Some considerations to have when discussing the case with your client may include the following:

  • What is the alleged defect in the product? What is the proposed alternative design offered by the plaintiff’s experts? What was the industry design at the time the subject product was designed, manufactured, and sold? If the alleged defect is a manufacturing defect, what is the evidence that the defect occurred during the manufacturing process as opposed to damage to the product while in use?
  • Who will tell the company story at trial regarding the design, manufacture, testing, and sale of the product? Is there a good story to tell, and if so, who will tell it? How will the company deal with prior complaints at the time of trial?
  • Are there any “bad documents” that your client will have to deal with at trial?

Often times, obtaining this information at the outset of the investigation of the claim can make or break the defense in terms of protecting and preserving evidence, establishing the defense, retaining top experts in the field before a claimant can, and preparing the overall defense strategy.

With proper preparation and early action, claims professionals and defense counsel can work collaboratively to minimize the risk and exposure that a product liability claim can present. Assessment of the particular claim and the product, past incidents, and investigation of potential damages are necessary to determine the optimal resolution timeline and strategy. Because each product liability case can vary, utilizing these techniques discussed early on in the life of the claim can aid in achieving the most effective and efficient result possible.


About The Authors
Multiple Contributors
Brenda Radmacher

Brenda Radmacher is a partner at Akerman LLP.

Mary Ann Vorndran

Mary Ann Vorndran is AVP Excess Claims at AXIS Insurance.

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