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Products Liability

LEGAL BACKGROUND


Product liability laws cover consumer goods and goods used in the workplace. Any business that designs, manufactures or supplies a physical product that is sold or given away free has a legal responsibility to ensure that the products are safe. Failure to meet these responsibilities can result in legal action, resulting in possible fines or imprisonment. Also, businesses could be sued by anyone who has been injured or has suffered damage to property arising from the use of an unsafe product. 


The main responsibility falls on producers, manufacturers and importers to ensure that products are safe by:


  • Ensuring that safety hazards are designed out of products, wherever possible;

  • Ensuring compliance with any specific product regulations or safety standards;

  • Warning customers about potential risks;

  • Providing information to assist customers understand the risks;

  • Monitoring the safety of products;

  • Taking appropriate action if a safety problem is found.


Particular care should be taken with high risk products such as toys, lifts and hoists, cosmetics, fireworks, food and medicines, or any product that has a health or safety application such as brake systems, heart monitors and safety critical protective equipment.


Often, several businesses are involved as producers and can be jointly liable if a product causes harm. For example, several component makers might supply parts to a manufacturer that assembles the product.


As well as involving manufacturers and importers, responsibility for product safety can apply to the following:


  • Businesses that supply “own-brands”, e.g., that are manufactured by others but sold as an “own-brand” product;

  • Businesses that change a product, for example, by repairing, refurbishing or customising;


  • Retail and wholesale distributors are not normally liable for products liability, except where they are unable to identify the product’s manufacturer, where the manufacturer has gone out of business, or where importing a product from outside the EU. However, a distributor might still face prosecution (rather than being sued) if it did not take reasonable steps to ensure that the product was safe.

 

IMPORTED PRODUCTS


Products imported from outside the EU (e.g., the Far East) can present particular exposures. Under UK/EU Law, the retailer/wholesaler of such imports will be considered as the “Manufacturer” and, as manufacturing and Quality Control standards in some Far Eastern territories may be lower than in the UK/EU, it is important that QC regimes are in place.

 

EXPORTED PRODUCTS


Any exported products must comply with the relevant standards of the territories into which they are exported. Although UK/EU standards are as good as most, they are not universally acceptable. In particular, products exported to North America (primarily USA, but also Canada) MUST comply with relevant US product safety standards. Although somewhat less of an issue than North America, many Asian territories (notably Australia, New Zealand, Korea and Japan) have developing sophisticated product safety standards, backed up by legal penalties that may differ from those of the UK/EU.


Failure to conform to such local product safety standards (particularly with USA) may make it impossible to defend a Product Liability claim and claim settlements in the USA can run to tens of millions of dollars.

 

RISK ASSESSMENT AND CONTROL


As with most other disciplines, the assessment of products liability risks should focus on the

degree of hazard posed by the business and its products, and the standard of risk control that is exercised. Fundamental aspects for consideration include:

  

DEGREE OF HAZARD

  • The markets into which products are supplied in respect of both the type of customers and their geographical location. Consumer products (e.g., retail) may present considerably greater exposure than those supplied for “expert” use;

  • The inherent hazards associated with the products supplied (including products which have been discontinued but which may remain in use for many years after they were supplied);

  • The position in the supply chain occupied by the business.

 

RISK CONTROL

In order to meet legislative obligations, businesses should adopt a pro-active approach to the management of products liability risks with a specific emphasis on design, manufacture, presentation and marketing to ensure product safety. Where appropriate, key elements should include: 


  • The undertaking of formal product safety risk assessments at the design and manufacturing stages, with the aim of foreseeing how accidents can occur and the implementation of design and manufacturing controls which reduce the risk to an acceptable level;

  • The keeping of accurate risk assessment records which should be retained for at least five years from the date after the last product has been supplied. In some instances, this time-frame can be longer;

  • The provision of an effective quality assurance system, including keeping comprehensive audit trails, enabling products to be manufactured to a consistent standard and specification, where appropriate via the route of ISO 9001 certification, and staff suitably trained and instructed;

  • Identifying and ensuring compliance with all relevant geographical and any specific regulations or safety standards for a particular product or product range, and the requirements for CE marking in compliance with UK/EU Product Safety Directives;

  • The taking of relevant legal advice, particularly in relation to exported products;

  • The provision of adequate and correct labelling, safety instructions and marketing statements;

  • The implementation and review of effective record keeping policies and procedures across the quality management spectrum;

  • Implementation and review of contractual arrangements, both implied and explicit, with suppliers and customers (it must be recognised that “Hold Harmless Agreements” may not be legally binding, particularly in relation to consumer products);

  • Exerting and documenting robust quality control supervision of sub-contractors;

  • Ensuring that safety complaints are thoroughly investigated and recorded, and faults rectified through a review of design and manufacturing processes;

  • Recognition that improving the standard of product safety is a continuous and ongoing process. Manufacturers and suppliers must keep up to date with new technology and any feedback received from end users arising from accidents, near misses, etc.

 

SURVEY EXPECTATIONS


For all cases where Products Liability forms part of the survey request, an assessment of the products risk should be made based on the appended check list, and the appropriate information included in the report.


In this regard, it is important to ensure that the level of investigation is commensurate with the perceived risk, ranging, for example, from a simple retail or wholesale business with limited products exposure, through to a manufacturing business involving high hazard products. In the case of the later, detailed investigations should be conducted, including taking an overview of the quality management documentation to verify the information obtained.    

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