How Should Organizations Evaluate Risks?
The following text and illustrations were added to this website as exemplar materials for how organizations should go about evaluating risks. The sample risk illustrated below is for "Product Liability."
Definition of Product Liability
Product Liability is the liability that results from a product that is defective in design, manufacturing, instructions, or advertising.
• For the seller of the product, this is the traditional product liability
• For the buyer of the product, this can be a workers compensation problem if an employee is injured
• It can also be an environmental problem if the defect leads to a chemical release or spill
• The buyer can also face regulatory risks if the failure of the product to comply with regulations results in a fine
Example of Product Liability Ohmeda Fire Sprinklers Product Liability
An example that illustrates the business risk is the recall of Ohmeda fire sprinklers. The recall was agreed to by Ohmeda and the Consumer Product Safety Commission. Under the recall program there will be a $50 allowance for distributors and installers of these sprinklers to replace them with an improved design. If someone who has these sprinklers installed in their house is injured because of the defect, there will be a potential for a Product Liability lawsuit. If there is damage caused to the home because of negligence while replacing the sprinkler, the contractor's insurance will be called upon to pay for the damages. If the recall instructions are alleged to be the reason for the damage, then Ohmeda will be named as a defendant as well.
The business risk to Ohmeda is the loss of goodwill on the part of its distributors, installers and customers. In this case, Ohmeda risks the loss of business to distributors who may choose to carry the products of other manufactures. Customers who choose these sprinklers for top end homes may decide to purchase from other manufacturers because of the loss of confidence in the design and manufacturing quality of the Ohmeda product.
There is also a regulatory business risk. If Ohmeda failed to comply with any Consumer Product Safety Commission (CPSC) regulation, there are potential penalties for late reporting of the problem that could result in fines and in the extreme criminal exposure.
Product Liability: Issues & Effects
The potential of Product Liability exists when a product leaves the manufacturer and enters the distribution channel or market. Accordingly, machines that are custom built for manufacturing or testing within the manufacturer's own facility are not considered products and are not subject to Product Liability.
The types of products that have the potential of Product Liability are:
• Products used by consumers which are purchased and are intended for personal use, or which are not purchased and may be used by the general public (e.g. shopping carts, playground equipment, etc.)
• Products that are provided to a Beta site to be tested
• Products that are loaned or given away
Another potential for Product Liability exists when people using or people in the vicinity of the product are injured and or property is damaged. Business liability exposures also exist where the product results in business interruption or other consequential damages.
When products under warranty fail and must be repaired or replaced at the manufacturer's expense, this too becomes a business risk since it is considered Product Liability. Other business risks occur where the manufacturer has entered into contractual agreements regarding the reliability or up-time of the product. In these situations, the manufacturer may face economic exposure if the product fails to meet the reliability specifications of the contract.
Product Liability has now been adopted in Europe and Japan. The difference in these parts of the world is that the legal systems are different than in the U.S. where legal fees are based on the amount of a settlement which usually amounts to approximately 33% of the settlement (This is known as a contingency fee arrangement). Other countries do not have contingency fee arrangements and legal fees are preset, or are set at an hourly basis. It is less likely then, that a plaintiff will bring a lawsuit in those countries. However, under conflict of laws rules, an injured European may bring a lawsuit in the United States, before a U.S. jury following the laws of the U.S. including the rules of evidence and damages. This is often the case when there is an airplane crash in a foreign country.
When managers consider the consequences that the enterprise may experience if the risk occurs, they should consider:
• Is the risk covered by insurance? Punitive damages are not covered by insurance in most states. Criminal penalties are personal to the individual. Recall insurance coverage is only now beginning to be a product that the insurance industry is offering.
• Does the manufacturer's supplier have sufficient amounts of and the right type of insurance to adequately indemnify or absolve themselves of any potential liability? An indemnification agreement may not have any value if the person who agrees to indemnify has no or inadequate insurance.
• How well prepared is the company to respond to the risk? If there is the need for a recall, can a recall be decided upon and carried out efficiently with the least impact on goodwill and at the lowest cost? If the product is defective, can the company fix the problem quickly without introducing new problems inadvertently?
Impacts of Product Liability can include cash-based concerns such as expenses and revenues as well as non-cash or indirect concerns such as loss of goodwill and reputation. These impacts can be both short and long-term for the company. Specific impacts of Product Liability include:
• Impact on goodwill
• Loss of sales
• Competition leverages the firm's problems (decline in competitive advantage)
• Lowered morale of employees
• Cost to fix the problem
• Increased insurance costs
• Cost to pay off judgment and defense costs above the risk retention and policy limits
• Expense to develop/implement quality and safety programs
The following table identifies several impacts associated with Product Liability and describes the nature and duration of these impacts.
Organizational Impact Table: Product Liability
Impacts Nature of Impact Duration of Impact
| Revenues | Expenses | Indirect | Short-term (<1Year) |
Long-term (>1Year) |
|
|---|---|---|---|---|---|
| Impact on goodwill | X | X | X | X | |
| Loss of sales | X | X | X | ||
Competition leverages the firm's problems |
X | X | X | X | |
| Lowered morale of employees | X | X | X | X | X |
| Cost to fix the problem | X | X | |||
| Increased insurance costs | X | X | |||
Cost to pay off judgment and defense costs above the risk retention and policy limits |
X | X | X | X | |
| Expense to develop/implement quality and safety programs | X | X |
Impact Example of Product Liability on a Firm
Recently, a rock climbing equipment manufacturer, Black Diamond, declared bankruptcy because of a major Product Liability lawsuit. At issue was the death of a novice climber who was climbing with a Sierra Club climbing instructor. At the time of the incident, the novice climber was using a type of belt that, when buckled incorrectly, does not protect the climber in the event of a fall. The climber fell, came out of his belt and was killed. The company was sued based on the Product Liability principles of strict liability for defective design.
Product Liability: Source & Causes
A firm may find themselves with a case of Product Liability from numerous causes which may occur either separately or in related groups. The most common and important causes of this problem include:
• Lack of management commitment to product safety
• Failure to create "safe" design
• Inadequate manufacturing quality program
• Improper or inappropriate market presence (incorrect market presence and use – false information or false training of customer)
• Inadequate review/control of sales/marketing representations (e.g., advertising, sales messages)
• Inadequate review/control of warning labels and training materials
• Inadequate review/control of independent contractors (e.g. installation and maintenance)
• Inadequate evaluation and selection of supplier
For an example of how various sources and causes create a situation of product liability for an organization, read about a case at Johnson and Johnson.
Risk drivers are variables that influence or determine (a) the probability of a risk occurring and/or (b) the severity of the impact on the organization should the risk occur. Some examples of
Product Liability risk drivers include:
• Dollar amount for quality/safety programs
• Rate and trend for three types of data:
o Number of complaints
o Number of mishaps (accidents that don't necessarily lead to harm or lawsuit)
o Number of product usage inquiries
• Life expectancy of safety-critical parts
• Number of cases in litigation
• Dollars spent in litigation
• Number of accidents in/with certain products or product lines
• Number of accidents in certain user groups
• Number of accidents in specific usage applications
• Dollars spent in claims management
The following table identifies the probability or frequency of occurrence and severity for each impact identified above.
Principle Drivers Will Influence
| Probability or frequency of occurence | Severity | |
|---|---|---|
| Dollar amount for quality/safety programs | X | |
| Rate and trend for number of complaints | X | X |
Rate and trend for number of mishaps (accidents that don't necessarily lead to harm or lawsuit) |
X | X |
| Rate and trend for product usage inquiries | X | |
| Life expectancy of safety-critical parts | X | |
| Number of cases in litigation | X | |
| Dollars spent in litigation | X | |
Number of accidents in/with certain products or product lines |
X | |
| Number of accidents in certain user groups | X | |
Number of accidents in specific usage applications Dollars spent in claims management |
X |
X |
The Tylenol Product Liability Case
Johnson & Johnson faced a product liability case in 1982, after seven people in the Chicago area died from taking Tylenol capsules contaminated with cyanide. The company maintained it should not be held liable because the tampering of the product happened after it left the company's control. After the poisonings, Johnson & Johnson recalled and remarketed the product only five weeks later in tamper-resistant packaging.
The problem was that Johnson & Johnson failed to create "safe" packaging for its product. Tamper-resistant packing had been around since 1923, which was when patents were given to inventors for this idea. The fact that Johnson & Johnson replaced the capsules in tamper-resistant packaging within five weeks indicates the company had access to this type of packaging, but chose not to use it. A major issue at trial was that Johnson & Johnson sold Tylenol to hospitals in tamper-resistant packaging, but offered no credible explanation for neglecting to use tamper-resistant packaging for the general public.
As a result of this product liability problem, Johnson & Johnson suffered through many litigation headaches. They unsuccessfully pushed for a battle to reclaim an estimated $100 million in losses related to the recall of the Tylenol product from its property and liability insurers. U.S. District Judge Fredrick B. Lacey ruled against Johnson & Johnson in 1985 over this matter and the ruling was upheld a year later by the 3rd U.S. Court of Appeals. Johnson & Johnson then claimed that it was entitled to collect recall expenses from the liability insurers because the recall was undertaken to prevent further deaths and additional claims against the company and its insurers. U.S. District Judge Maryanne Trump Barry rejected this claim in 1986.
Johnson & Johnson settled with the survivors of the seven victims for $35 million to $39 million. This settlement was reached nine years after the deaths. The 50-page lawsuit alleged that Johnson & Johnson was negligent in the packaging of Tylenol because they "knew or should have known that the capsules required safe packaging."
(Sources: Douglas McLeod, "J&J subsidiary denied coverage for Tylenol recall." Business Insurance, September. 22, 1986, p.1
Douglas McLeod & Stacy Adler, "Tylenol death payout may top $35 million." Business Insurance, May 20, 1991, p.1
Stacy Adler, "Lawyers Discuss Tylenol Litigation." Business Insurance, August 5, 1991, p. 15-16.)
Analytics, Diagnostics, & Metrics
Alerts
The following checklist can be used to alert an organization to the potential of a Product Liability claim.
• Are accurate high quality hazard data being maintained and monitored
(hazards found or corrected prior to ship to market is low)? YES NO
• Has a budget been established for either the quality or safety program? YES NO
• Are incident data for marketing/distribution as well as customer usage
being tracked? YES NO
• Is warranty data being analyzed? YES NO
• Are warranty data within expected parameters? YES NO
• Have adequate provisions been made to defend against litigation? YES NO
• Is an overall corporate strategy in place regarding how to effectively
manage a product liability portfolio? YES NO
Analytical Tools
There are a number of well established tools that are used to perform Product Liability risk analysis. The choice of tool used is dependent on:
• Type of product
• Stage of product design
• Maturity of the product
• Complexity of the product
• Risk associated with the product
• Amount of information available about the details of the product's design
• Amount of experience with the product or products like the one being studied
The tools provide different depths of analysis. The preliminary flow diagram of risk analysis is the "big picture" tool for analyzing the product and providing a blueprint for further analysis.
For systems where the concern is a safety incident due to individual hardware failures, Failure Mode and Effects Analysis (FMEA) is the preferred technique.
If the product involves interaction of multiple hardware failures, operator or maintainer errors, and environmental conditions, a Fault Tree Analysis (FTA) is the preferred technique.
Product Safety and Liability Prevention Program
The Product Safety and Liability Prevention Program is a systematic process to investigate and assess potential hazards. This program utilizes corporate management to create, implement, and maintain a corporate wide safety policy program. This program oversees the corporate functional business units of design, manufacturing, marketing and sales, and post-sales. Together these business units comprise the product life cycle.
The following "Product Life Cycle" model has been provided as a tool to help users better understand the life cycle. Embedded in the model are a series of supporting tools which can be used to guide users through the various phases of the model.
Management: Product Safety and Liability Prevention Program
The table below illustrates key steps and questions that can help management oversee the product safety and liability prevention program.
Tool for Management:
MANAGEMENT
Corporate Management
• Create and implement a corporate safety policy and program
• Define and enforce procedures to implement the program
• Identify personnel responsible for product safety
• Maintain proper program documentation
Recordkeeping and Documentation
• Establish requirements and implement program
• Are members of management committed to the program?
• Is the company policy enforced consistently?
• Is management actively involved?
• Do members of management delegate authority?
• Does the safety team involve all departments in the company?
• Is there a system for measurement, corrective action and status reporting being implemented?
Adapted from figure 20-2, Products Liability: Design and Manufacturing Defects, Bass, Lewis, 1986.
Design: Product Safety and Liability Prevention Program
The design-evaluation aspect of this tool incorporates three elements:
1. Design criteria
2. Design review
3. Design demonstration
There are four criteria that need to be emphasized during every design evaluation. They are:
1. Be formal. Document all steps in the design evaluation
2. Consider all user product safety requirements and functional operating parameters
3. Include safety and quality assurance partner in the evaluation
4. Require management participation in the overall design evaluation
The table below identifies key steps and questions within the design process.
DESIGN
Design Engineering
• Use design reviews for new designs and major revisions
• Designate safety critical items
• Perform safety studies on specific safety critical designs
• Evaluate likelihood of failure of equipment and systems
• Evaluate potential consequences
Development Testing
• Assure safety of design under foreseeable conditions of use
Prototype Testing
• Test system for safety
• Test under realistic conditions
• Does the Company have standards for the design and development of its products, software and manuals?
• Has disposal of components contaminated with hazardous materials been considered during initial design?
• During design and development, are real world tests of the product under foreseeable conditions of use conducted?
• Is compliance with the safety requirements contained in the product design specification verified?
• Does the company have a policy for engineering change procedures?
• Does the policy include a formal procedure for dealing with suppliers and subcontractors?
• Does the design engineering change procedure include a sign-off by the Product Safety Coordinator?
Adapted from figure 20-2, Products Liability: Design and Manufacturing Defects, Bass, Lewis, 1986.
Manufacturing: Product Safety and Liability Prevention Program
The manufacturing function includes:
• Fabrication
• Assembly
• Inspection & testing procedures
• Storage handling
• Shipping
The table below depicts key steps and questions the company needs to ask itself.
MANUFACTURING
Manufacturing and Quality Control
• Develop inspection and test procedures
• Assure manufacturing process control
• Establish supplier selection and performance criteria
• Review purchase agreements and contracts
• Establish receiving inspection criteria
• Are there supplier selection and control criteria established?
• Are you implementing a receiving inspection plan?
• Do you have an operation for in-process control?
• Is there a finished product control implemented?
• Are there standards in place for material control and assessment?
• What procedures are implemented for proper storage, handling and shipping?
Adapted from figure 20-2, Products Liability: Design and Manufacturing Defects, Bass, Lewis, 1986.
Marketing & Sales: Product Safety and Liability Prevention Program
The marketing and sales function incorporates:
• The advertising information for the product
• User or operator warnings that protect the end user
• Available warranty service and recall procedures in case the product fails
The table below identifies key steps and questions the company needs to ask itself.
MARKETING AND SALES
Word Control
• Substantiate advertising and sales claims
• Review express and implied warranties
• Review contract terms and conditions
• Review instructions and manuals
• Assure accuracy and completeness of warnings
• Are advertising and sales claims substantiated?
• Are express and implied warranties reviewed?
• Are contract terms and conditions reviewed?
• Are instructions and manuals reviewed?
• Are hazard warnings on the product and in the manuals reviewed?
Adapted from figure 20-2, Products Liability: Design and Manufacturing Defects, Bass, Lewis, 1986.
Post Sales: Product Safety and Liability Prevention Program
The post sale aspect of this tool incorporates five elements:
• Installation
• Product/Facility
• Maintenance
• Field Support and Operation
• Accident Reporting and Investigation/ Failure Analysis
The table below identifies key steps and questions the company needs to ask itself:
POST-SALE
Installation
• Identify safety critical items
• Draft clear and accurate installation instructions
• Develop safety procedures and training for installations
• Evaluate compatibility of product and facility
Product/Facility
• Assure safety of interface between product and facility
Maintenance
• Identify safety critical factors
• Provide malfunction indicators, safety shutdown devices and maintenance recorders
Field Support and Operation
• Record owners' name and product serial numbers
• Provide user manuals with safety instructions
• Create, provide and enforce recall and safety advisory procedures
Accident Reporting and Investigation / Failure Analysis
• Develop and implement procedures
• Perform failure analysis
• Correct and improve product
• Recall / retrofit decision-making
• Are there installation requirements?
• Are there procedures for safe installation?
• Have hazardous maintenance / repair tasks been identified?
• Have maintenance / repair procedures and manuals been prepared?
• How are products repaired and maintained?
• Does the company communicate with its customers?
• How effectively can the company defend itself and its products?
Adapted from figure 20-2, Products Liability: Design and Manufacturing Defects, Bass, Lewis, 1986.
Flow Diagram of Risk Analysis Procedure
The following flow diagram is provided to assist users conducting a Preliminary Hazard Analysis (PHA). To navigate through this risk analysis, click on the steps in the Flow Diagram of Risk Analysis Procedure and you will be prompted with instructions in how to conduct the analysis.
Step 1
Identify the Process or Product Hazard Characteristics
The table below is provided to assist you with the Preliminary Hazard Analysis (PHA). In Step 1 of the PHA, please enter the product or process characteristics which identify a hazard in the highlighted column.
| Product or Process Characteristics | Hazard | Cause | Effect |
Risk Probability Severity |
Risk Reduction Techniques |
| Milling Machine | |||||
| Control Box |
When you have completed this task, continue on to Step 2
Step 2
Identify Possible Hazards
The table below will enable you to continue with the Preliminary Hazard Analysis (PHA). In Step 2 of the PHA, enter the hazards associated with each of the product or process characteristics identified in Step 1. If additional help is needed in identifying the hazards, one of the following four tools may be used:
• Hazard and Operability Studies (Hazop).
• Software Hazardous Effects Analysis (SHEA).
• Failure Mode Effects Analysis (FMEA).
• Fault Tree Analysis (FTA).
You may enter these hazards directly in the highlighted column below.
| Product or Process Characteristics | Hazard | Cause | Effect |
Risk Probability Severity |
Risk Reduction Techniques |
| Milling Machine | Pinch Point | ||||
| Control Box | Electrical Shock |
When you have completed this task, continue on to Step 3.
Step 3
Identify the Cause and Effect for Each Hazard
The table below will enable you to continue with the Preliminary Hazard Analysis (PHA). In Step 3 of the PHA, please enter the cause and effect associated with the hazard identified in Step 2. You may enter the source and cause directly in the highlighted columns below.
| Product or Process Characteristics | Hazard | Cause | Effect |
Risk Probability Severity |
Risk Reduction Techniques |
| Milling Machine | Pinch Point | Exposed Moving Pieces | Personal Injury | ||
| Control Box | Electrical Shock | Bare Wire | Personal Injury |
When you have completed this task, continue on to Step 4.
Step 4
Estimate the Probability and Severity of Occurrence for Each Hazard
The table below will enable you to continue with the Preliminary Hazard Analysis (PHA). In Step 4, use the Hazard Severity and Probability Chart below to quantify the probability and severity of risks associated with the hazards identified in Step 2.
You may complete Step 4 by scrolling down to the PHA table located at the bottom of this screen by entering the probability and severity of occurrence in the highlighted columns.
Hazard Severity
| Category I | Catastrophe | May cause death or system loss. |
| Category II | Critical | May cause severe injury, sever occupational illness, or major system damage. |
| Category III | Marginal | May cause minor injury, minor occupational illness, or minor system damage. |
| CategoryIV | Negligible | Will not result in injury, occupational illness or system damage. |
Hazard Probability
| Descriptive Word | Level | Specific Individual Item | Total Product Line |
| Frequent | A | Likely to occur frequently. | Continuously experienced. |
| Moderate | B | Will occur several times in life of an item. | Will occur frequently. |
| Occasional | C | Likely to occur sometime in the life of an item. | Will occur several times. |
| Remote | D | So unlikely, it can be assumed that this hazard will not be experienced. | Unlikely to occur, but possible. |
| Unlikely | E | Probability of occurrence cannot be distinguished from zero. | So unlikely, it can be assumed that this hazard will not be experienced. |
| Impossible | F | Physically impossible to occur. | Physically impossible to occur. |
You may enter the probability and severity of occurrence associated with the hazards identified directly in the highlighted columns of the table below.
| Product or Process Characteristics | Hazard | Cause | Effect |
Risk Probability Severity |
Risk Reduction Techniques |
| Milling Machine | Pinch Point | Exposed moving pieces | Personal Injury | B II | |
| Control Box | Electrical Shock | Bare wire | Personal Injury | C I |
When you have completed this task, continue on to Step 5.
Step 5
Apply Risk Reduction Techniques
The table below will enable you to continue with the Preliminary Hazard Analysis (PHA). In Step 5 of the PHA, apply the risk reduction techniques for each hazard identified. You may enter the risk reduction techniques to be used directly in the highlighted column of the table below.
| Product or Process Characteristics | Hazard | Cause | Effect |
Risk Probability Severity |
Risk Reduction |
| Milling Machine | Pinch point | Exposed moving pieces | Personal Injury |
B II |
Design machine guard. |
| Control Box | Electrical shock | Bare wire | Personal Injury | C I | Run all wire in conduit. Replace bare wire. |
When you have completed this task, continue on to Step 6.
Step 6
Have Other Hazards Been Generated as a Result of Risk Reduction Techniques Applied?
The table below will enable you to continue with the Preliminary Hazard Analysis (PHA). In Step 6 of the PHA, identify any additional hazards which may have resulted from the risk reduction techniques applied in Step 5. You may enter any additional hazards directly in the highlighted rows of the PHA table below.
If additional hazards have been generated as a result of the risk reduction techniques, proceed directly to Step 7. If no additional hazards are generated as a result of the risk reduction techniques, continue on to Step 8.
Step 7
Have All New Hazards Been Evaluated?
The table below will enable you to continue with the Preliminary Hazard Analysis (PHA). In Step 7 of the PHA, any additional hazards that were generated from the risk reduction techniques applied in Step 5 should be analyzed by repeating the PHA Steps 3-5.
| Product or Process Characteristics | Hazard | Cause | Effect |
Risk Probability Severity |
Risk Reduction Techniques |
| Milling Machine | Pinch Point | Exposed moving pieces | Personal Injury | B II | Design machine guard |
| Control Box | Electrical Shock | Bare wire | Personal Injury | C I | Run all wire in conduit. Replace bare wire. |
| Fire | Electrical shorting | Personal Injury | B II | Install circuit breaker. |
Once all additional hazards have been analyzed, you may continue with the PHA by clicking on Step 8 in the Flow Diagram of Risk Analysis Procedure located on the left side of this screen.
Step 8
Is the Product/Process Safety Adequate?
In Step 8 of the PHA, an assessment must be conducted to determine if the safety inherent in the product/process meets company, industry, and government standards.
If the safety of the product/process is inadequate, then click on the Exit button in the Flow Diagram of the Risk Analysis Procedure on the left hand side of the screen.
If the safety of the product/process is adequate, then the product is ready to be released to ultimate consumers, or the process is ready for production.
Strategies & Solutions
Downsides
Dealing with Product Liability issues can be very disruptive and costly to an organization. Accordingly, when a Product Liability issue surfaces, the affected organization will want to correct the problem as quickly and smoothly as possible. Ideally, the organization will take steps/actions to prevent issues from occurring in the first place, however, in the event of a Product Liability dispute corrective actions may be necessary. Strategies for dealing with Product Liability issues fall into two major categories, preventive and corrective.
Preventive
The primary step in prevention is to develop and implement a holistic risk management program such as a "Product Safety and Liability Prevention Program." A central component of this type of program is defining, in specific terms, what level of exposure to Product Liability is acceptable. The two primary components most comprehensive prevention programs address are Product Design and Human Factors/Ergonomics.
• Product Design
Of critical importance is developing designs that are structurally capable of "…withstanding
the foreseeable forces under reasonable and realistic accident scenarios." Formal design
reviews with all key stakeholders is normally necessary to ensure design specifications are in
place, are reasonable and prudent, and that these design features are possible to produce
with existing manufacturing processes.
• Human Factors/Ergonomics
Of equal importance to the Product Design are provisions made to ensure end
users/consumers use the product as intended – Human Factors/Ergonomics. This normally
encompasses detailed instructions written in the language of intended users/consumers,
demonstrations if necessary, and guidelines describing the intended operating
environment/parameters.
Corrective
Corrective strategies should be based on a pre-designed set of actions or protocols which automatically come into play when a Product Liability issue arises. These corrective strategies may actually utilize the strategies identified above as Preventive, however, several additional factors should be considered as part of a comprehensive corrective strategy. These factors, at a minimum, include:
• Corrective Action Decision Making (CADM)
Defining who is consulted, what decision making authority these individuals have, how
decisions are made, and timing issues prior to a Product Liability issue surfacing are key
components of the CADM Process.
• Recall Decision Making (RDM)
Separate from, but related to, CADM is RDM. Once decisions related to correcting a design
flaw have been made, decisions related to recalling or not recalling products must also be
made. As in the CADM, defining who is consulted, what decision making authority these
individuals have, how decisions are made, timing issues, where repairs will be completed,
allocating resources needed for product repair, and cost parameters should be identified –
optimally, before a potential issue arises.
Upsides
Companies that gain expertise in Product Liability avoidance and control have a valuable commodity to sell to other users. Some industry organizations are involved in activities both to provide better knowledge of liability problems to their member companies and to work towards legislative protections against abuses of the civil liability system. Controlling Product Liability risk can produce the following upsides:
• Decreased costs to certify product to Underwriters Laboratories (UL) or other standards
• Decreased costs to meet international "Conformite Europeanne" (CE) requirements, CE is the
European equivalent of the UL
• Decreased risk of criminal penalties
• Decreased risk of punitive damages
• Decreased warranty costs
• Decreased costs of recalls and retrofits
• Decreased costs of design changes
• Decreased costs of insurance
• Decreased number of accidents
• Decreased number of lawsuits
• Decreased time spent supporting litigation (e.g., document preparation, interrogatories,
depositions, courtroom activities)
• Increased speed of getting new products to market
• Increased customer satisfaction
• Increased profitability
• Increased peace of mind on the part of company personnel
• Increased customer goodwill
• Increased market share and sales
• Safer products
Lessons Learned
Title: Dow-Corning One Step Closer To Resolving Class-Action Product Liability Suit.
Summary: A Product Liability suit regarding breast implants brought against Dow-Corning is about to cost the company $3.2 billion, threatens to draw into to the mess Dow-Corning's parent company Dow-Chemical, and more Product Liability promises to follow.
