Product liability: retention and risk management solutions: records managers should take the lead in developing a cross-functional team to prepare for possible product liability litigation issues.

• Author: Haider, Mary W.
• Position: Management Wise

A 15-year-old boy disassembles his new paintball- gun after using it. His friends hear a hissing sound and then a "pop." The carbon dioxide container that powered the paintball gun detached and struck the teenager above his eye, causing a frontal head injury.

Who is responsible?

* The boy for not following safety procedures when disassembling the gun

* The parents for not properly supervising the gun use

Who can be sued?

* The manufacturer for defective assembly of the product

* The component manufacturer for producing a defective product

* The retailer for selling a dangerous product

When can a lawsuit be initiated?

* Within one year of the incident

* Within one year of the sales transaction

* Within 15 years of the sales transaction

* Whenever injury occurs

Where can a lawsuit be initiated?

* Only in the state/country where the sales transaction occurred

* Only in the state/country where the incident occurred

* In any state/country where the product is/was sold

* In any state or country

Does it matter if the paintball gun is one year old or 10 years old? What if the boy is 12, 21, or 45 years old? Does the answer change if the incident occurred last year or 20 years ago? The answers lie in product liability law--an area with implications for records management programs.

Product Liability Defined

An overview of this topic from Wex, a collaborative online legal dictionary/ encyclopedia hosted by the Legal Information Institute at Cornell Law School, states that "Products liability refers to the liability of any or all parties along the chain of manufacturing of any product for damage caused by that product. This includes the manufacturer of component parts (at the top of the chain), an assembling manufacturer, the wholesaler, and the retail store owner (at the bottom of the chain). While products are generally thought of as tangible personal property, products liability has stretched that definition to include intangibles (gas), naturals (pets), real estate (houses), and writings (navigational charts)."

The Wex overview states that defects in design, manufacturing, and marketing are the three types of product defects for which manufacturers and suppliers incur liability. "Strict liability wrongs do not depend on the degree of carefulness by the defendant," according to Wex. "It is irrelevant whether the manufacturer or supplier exercised great care; if there is a defect in the product that causes harm, he or she will be liable for it."

The authors of a 2004 article in Insurance Journal concurred, "... products liability is generally considered a 'strict liability' tort, i.e., liability doesn't depend on showing negligence; simply showing a defective product, or a failure to give adequate warnings, and a resultant injury is enough to establish a prima facie case of liability. It's irrelevant that the defendant used great care, etc."

Product Liability Legal Remedies and Their Effects

Litigation in the United States is most notable for its spiraling costs and insurance rates. But, according to the law firm of Monheit, Silverman, and Fodera, "A products liability lawsuit is the best, if not the only, remedy for consumers injured by unreasonably dangerous products ... The products liability lawsuit is the consumer's most effective weapon against unreasonably dangerous products. Regulations often lack teeth and offer little more than a wrist slapping to the manufacturer ... Because of the consumer's right to personally enforce the law through his or her decision to bring a products liability lawsuit, manufacturers know that if they create a product that is unreasonably dangerous, they subject themselves to serious liability."

Randall Goodden, a product liability prevention specialist says, "The epidemic of product liability lawsuits in the United States results in many corporations now being required to pay substantial risk insurance premiums or defense costs, forcing what might have been healthy organizations into major deficits, if not bankruptcy. Insurance premiums for U.S. companies are twenty times greater than that of companies overseas."

Who Is at Risk

Product liability laws can be applied to any organization that operates within the supply chain. This includes:

* Component manufacturers

* Finished goods manufacturers

* Distributors

* Retailers/Wholesalers

* Repairers

* Assemblers

* Testing Laboratories

* Designer/Engineering Firms

An organization that can be classified in one or more of these categories maybe a target for product liability litigation. Organizations that include research and/or manufacturing of consumer products--and especially those in highly regulated industries--may respond to product liability litigation on a frequent basis. Other organizations may respond to relatively few cases.

Sources of information needed in product liability cases may reside in unlikely places. Accounting records, for example, may contain the information needed to prove or disprove that a company has sold a specific product on a specific date to a particular customer--the very information that a risk management group may need. Therefore, it may not be possible to destroy such records on schedule, even though they have met all applicable regulations and the required legal, tax, and accounting managers have signed off. The issue becomes one of developing an effective records retention requirement without resorting to assigning permanent retention to all records series. Under the...