If your business is involved with the manufacturing, distribution or retailing of products, it’s important to have an understanding of how the law works so that you know what to do if your company is faced with an action against it for the supply of a defective product. In this article, our business dispute solicitors will explain the most important considerations if this happens, and offer practical suggestions and strategies to help you handle a product liability claim.
- What is a product liability claim?
- How is a product deemed ‘defective’?
- Who can be held liable in a product liability claim?
- Types of product liability claim
- What are some examples of product liability claims?
- Common defences to product liability claims
- What is the statute of limitations on product liability in the UK?
- How to reduce the likelihood of a product liability claim
- Systems for handling a product liability claim
- Document retention & destruction policies
- Document retention
- Evidence and litigation
- What about day-to-day documents?
- Additional benefits of a successful document retention policy
- Destruction of documents
- Pending litigation
- Consequences of document destruction
- Areas of high risk in document retention and destruction policies
- Emphasis for staff training on policies
- The importance of having a strategy in place to handle any claims effectively
- Contacting your insurance provider
- An overview of how to handle a product liability claim
What is a product liability claim?
A product liability claim is a claim for compensation that arises as a result of a product being defective in some way causing injury to a person or damage to property. In very serious cases, a defective product can even be involved in causing someone’s death.
How is a product deemed ‘defective’?
The law, in the form of the Consumer Protection Act 1987 (‘the Act’), says that a product is defective if ‘the safety of the product is not such as persons generally are entitled to expect.’ Of course, what a person might be entitled to expect when it comes to safety will be different depending on multiple factors including what the product is, its price, its intended use, how it was marketed, etc.
Who can be held liable in a product liability claim?
It’s possible that one or more of several types of company in the supply chain can be held liable in a product liability claim brought by a consumer, i.e. be considered legally responsible for the defective product. This includes manufacturers, suppliers, distributors and retailers.
Types of product liability claim
The main kinds of product liability claims our specialist lawyers commonly see relate to the following situations, so if your own company’s business is associated with any of these potential issues then it’s good to be aware of how specific types of product liability claims can arise:
- Manufacturing errors: According to the law, the manufacturer of a product is held responsible for defects – even if they weren’t aware of the defect’s existence before a claim is made.
- Design flaws: The fault for a defective product sometimes lies within the design of the product itself – this could be, for example, in connection with the design specifications.
- Inadequate warnings or instructions: If an item doesn’t contain sufficient warnings or have full and proper directions for its use, this could also render the product defective if it causes injury or damage.
What are some examples of product liability claims?
Product liability claims can arise across a whole range of sectors and below are just a small sample of some of these:
- Injuries caused by defective appliances, equipment or electrical goods
- An accident caused by a defective vehicle
- Death or serious injury caused by a defective medical device or implant
- Physical harm caused as a result of using a contaminated cosmetic product
Common defences to product liability claims
Although liability for a product liability claim under the Act is classed as ‘strict’ (meaning that a person injured by a defective product doesn’t have to prove that the manufacturer was negligent to bring a claim), there are certain defences available that might apply to a claim brought against your company:
- That the product is defective in order to comply with some rule of domestic or European law.
- The party the claim is being made against (i.e. you as the defendant) didn’t supply the product.
- That the product was not manufactured or supplied in the course of a business.
- That the defect didn’t exist at the time the product was put into circulation in the supply chain.
- In cases where a party is being sued because it manufactured a component, that the defect is a defect within the finished product, and came about because of the way the finished product was designed or because of instructions given by the manufacturer of the finished product.
The Act also includes a 'development risks/state of the art' defence, which creates a defence if the 'scientific and technical knowledge' at the time the product was manufactured was not such that the producer of a similar product might have been expected to discover the defect.
What is the statute of limitations on product liability in the UK?
The ‘statute of limitations’ refers to how long a person has to bring a product liability claim to court. The law states that court proceedings for product liability claims must be issued within three years of the date of injury. If the injury happened more than three years ago, it could still be possible to bring a claim if the claimant only discovered that the injury was caused by a defective product within the last three years.
The Act additionally provides a longstop period which requires that any claims brought under it are brought within ten years from the date that the specific product was put into market circulation. If the ten-year period expires before the expiry of the three-year statutory limitation period, then the earlier date will apply.
How to reduce the likelihood of a product liability claim
There are a few steps it’s wise to take in order to minimise the risks of having to deal with a product liability claim. These include:
- Strengthening product quality control and testing
- Enhancing warning labels and instructions
- Educating employees on risk management and product safety
In the following sections in this article, we’ll go into further detail about the practical aspects of handling a product liability claim in the event that one arises despite taking steps to reduce the likelihood of this happening.
Systems for handling a product liability claim
Setting up an effective system is your first consideration. It’s strongly recommended that you designate a member of staff to deal with the legal aspects of product liability claims, and that all other staff are made aware of who this is. This person’s role would also involve being the point of contact for any external lawyers that may come on board to provide extra support.
What if you run a large business?
In larger firms, putting a team together who are responsible for dealing with claims is recommended; including but not necessarily limited to the following:
- An in-house lawyer
- A senior manager/director with technical 'know-how' of the product
- A PR officer, who would handle the media implications of details of the claim entering the public domain. (This is important because of the wider implications of this on the business as a whole.)
Practicalities if litigation arises
Litigation in product liability claims is often a time-consuming process, both in terms of gathering evidence and the court hearing itself.
It will depend on the size and complexity of the claim, but you’ll need to bear in mind the implications for the efficient functioning of the company when certain staff are absent due to the need to go through witness evidence with your lawyers, and where staff are obliged to physically attend a trial to give oral evidence, for example.
Document retention & destruction policies
If your business doesn’t have these policies in place, getting the right advice on ensuring that the company satisfies the requirements of all jurisdictions in which the company and its subsidiaries operate is essential. Additionally, you need to have a system in place for storing and retrieving documents and data.
A 'document' is classed as anything on which information is recorded in a tangible or intelligible form. This includes the following:
- Electronic communications
- Diaries of directors and employees
- Tape recordings
- Documents which have been deleted from a computer, but can be retrieved from its hard drive
Evidence and litigation
In the event of a claim, you need to ensure that any policy put in place covers the need for documents that may be produced as evidence in product liability court proceedings to be safely retained.
What about day-to-day documents?
There’s no overarching legal obligation for your business to keep every document it produces in the day-to-day running of the company. However, it’s advisable to carry out risk assessments to determine which documents ought to be kept and for how long. Beyond any time limits imposed by relevant legislation, you might need to decide if certain documents should be kept for even longer. This is because particular documents may be needed as key evidence if further product liability claims are brought against your company in the future.
Examples of suggested documents to retain are those in relation to:
- Quality control
- Product designs
- Safety checks
- Any 'near misses'
Additional benefits of a successful document retention policy
In proceedings in the UK, all documents relevant to legal proceedings will need to be disclosed to the other party, so a robust document retention policy will assist with and streamline the often bulky disclosure process.
Destruction of documents
Policies on document destruction should link seamlessly with your policies on document retention – and they’re of equal importance. Also, any timeframes set for the destruction of certain categories of documents should be in line with time limits set out in the relevant laws and regulations.
Below are some examples of categories of documents it would be wise to consider having destruction policies for:
- Marketing materials
- Customer complaints
- Quality assurance documents
- User manuals
- Technical documents
In order to avoid allegations of deliberately destroying documents if litigation is potentially on the horizon, you should always only destroy documents in line with your policy as opposed to on an ad hoc basis (and of course, preserve any documents relevant to the litigation in any event – see below).
As soon as your company becomes aware that litigation is even being contemplated, you should ensure that all routine destruction of documentation is halted. There’s a duty under the Civil Procedure Rules to preserve all disclosable hard copy and electronic documents in these circumstances. It’s vital to highlight here that ‘disclosable documents’ include all documents, whether they help or hinder your case.
Consequences of document destruction
Destroying documentation always carries a risk, whether it’s done in good faith or deliberately. This is due to the fact that it could prejudice a litigant’s case and result in a claim being struck out, i.e. thrown out of court. There is an increasing trend of the courts being more likely to scrutinise a company’s policies on this, so you should ensure that your firm’s document destruction (and retention) policies are as watertight as possible.
Areas of high risk in document retention and destruction policies
In circumstances where companies already have policies in place, it’s advisable to take heed of the following 2 high risk areas if you’re needing to create new policies, or modify existing ones:
- Implementation: failing to train staff properly so that they are not fully aware of how the policies work, or their obligations in relation to them.
- Electronic documents: Failure to adapt existing policies to take into account the fact that most business communications are now electronic.
Emphasis for staff training on policies
Below is some guidance on what any staff training on policies and document creation should include:
- Discouraging staff from creating their own personal documents (for example notes and files – both hard copy and electronic).
- Teaching employees to keep personal opinions to a minimum and, should opinions be necessary, recording those opinions with supportive reasoning.
- Providing basic training on the principles of legal privilege.
- Encouraging employees to consider whether creating a document is absolutely necessary and if not, not to do so.
The importance of having a strategy in place to handle any claims effectively
It’s very important that your business has a strategy in place for defending claims, from the moment a complaint is received right up until the conclusion of litigation.
The key elements of this strategy should include the following:
- Check the limitation period at the outset and note when it expires.
- Investigate whether the claimant has any links to your company.
- Review all of the evidence that the claimant has provided to you in support of their claim.
- Consider whether your company is potentially liable, i.e. is there any merit to the claim?
- Check any relevant insurance policies: firstly, will it cover this claim and secondly, do you need to notify the insurers at this stage? If so, what will they need from you?
- Manage the reputational effects upon your business, bearing in mind that product liability disputes often get into the media. Ensure your PR strategy is in place.
- Appoint business dispute lawyers with experience of this particular type of litigation.
- Check whether the claimant has adhered to any applicable Pre-Action Protocol before proceedings were issued, in accordance with the Civil Procedure Rules.
- Conduct an internal investigation and preserve all relevant documents as outlined above.
- Check whether you need to notify any third parties (for example, distributors, manufacturers, suppliers, regulatory authorities, and other buyers of the product).
- Consider whether alternative dispute resolution (ADR) may be appropriate.
Contacting your insurance provider
You should contact your insurance provider straightaway once you become aware of a product liability claim against your business – the majority of policies specify this as a term, so it’s really important that you act immediately in notifying them, so as to avoid the risk of the policy being invalidated.
Take the time to review your policy carefully to ensure that you’re complying fully with its terms.
An overview of how to handle a product liability claim
The points below provide a handy guide as the basis for your approach to handling a product liability claim:
- Designate a senior employee as the claims handler and provide them with all details of the claim immediately.
- Suspend all document destruction policies until the dispute has concluded.
- Check any insurance policies and notify insurers immediately.
- Notify any relevant third parties.
- Diarise key dates (for example, expiry of limitation period, the date you were notified of the claim, the date by which a response to the letter of claim is required, the date the defence is due and all other dates in the timetable set by the court).
- Implement your PR strategy.
- Instruct lawyers where necessary.
- Conduct an internal investigation and take stock following the outcome of this.
It is clear that there’s a need to act quickly – and in a structured way – when your business is faced with a potential product liability claim. Having the right policies in place and being proactive are important, as is training your staff thoroughly so as to minimise the risk of any errors being made that might jeopardise your company’s position.
Our team of specialist business dispute solicitors have a wealth of experience in this technically complex area, and are able to provide the right advice tailored to the needs of your business.