Product liability

Product liability is the area of law in which manufacturers, distributors, suppliers, retailers, and others who make products available to the public are held responsible for the injuries those products cause. Although the word "product" has broad connotations, product liability as an area of law is traditionally limited to products in the form of tangible personal property.

Product liability by country

The overwhelming majority of countries have strongly preferred to address product liability through legislative means. In most countries, this occurred either by enacting a separate product liability act, adding product liability rules to an existing civil code, or including strict liability within a comprehensive Consumer Protection Act.

The United States and the European Union's product liability regimes are the two leading models for how to impose strict liability for defective products, meaning that "[v]irtually every product liability regime in the world follows one of these two models." In 1993, it was reported that "[n]o other country can match the United States for the number and diversity of its product liability cases, nor for the prominence of the subject in the eyes of the general public and legal practitioners." This was still true as of 2015: "In the United States, product liability continues to play a big role: litigation is much more frequent there than anywhere else in the world, awards are higher, and publicity is significant."

In the United States, 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 proof of different elements in order to present a valid claim.

History

For a variety of complex historical reasons beyond the scope of this article, personal injury lawsuits in tort for monetary damages were virtually nonexistent before the Second Industrial Revolution of the 19th century. As a subset of personal injury cases, product liability cases were extraordinarily rare, but it appears that in the few that were brought, the general rule at early common law was probably what modern observers would call no-fault or strict liability. As personal injury and product liability claims began to slowly increase during the early First Industrial Revolution (due to increased mobility of both people and products), common law courts in both England and the United States in the 1840s erected further barriers to plaintiffs by requiring them to prove negligence on the part of the defendant (i.e., that the defendant was at fault because its conduct had failed to meet the standard of care expected of a reasonable person), and to overcome the defense of lack of privity of contract in cases where the plaintiff had not dealt directly with the manufacturer (as exemplified by Winterbottom v. Wright (1842)). During the Second Industrial Revolution of the mid-to-late 19th century, consumers increasingly became several steps removed from the original manufacturers of products and the unjust effects of all these doctrines became widely evident. James acknowledged that traditional negligence and warranty law were inadequate solutions for the problems presented by defective products, but argued in 1955 those issues could be resolved by a modification of warranty law "tailored to meet modern needs," while Prosser argued in 1960 that strict liability in tort ought to be "declared outright" without "an illusory contract mask." Ultimately, it was Prosser's view which prevailed. California case of Greenman v. Yuba Power Products, Inc. (1963), in which the Supreme Court of California openly articulated and adopted the doctrine of strict liability in tort for defective products. Greenman heralded a fundamental shift in how Americans thought about product liability towards a theory of enterprise liability—instead of basing liability on the defendant's "fault" or "warranty", the defendant's liability should be predicated, as a matter of public policy, on the simple question of whether it was part of a business enterprise responsible for inflicting injuries on human beings. As noted above, it was Greenman which led to the actual emergence of product liability as a distinct field of private law in its own right. Justice Traynor laid the foundation for Greenman with these words:

<blockquote>Even if there is no negligence, however, public policy demands that responsibility be fixed wherever it will most effectively reduce the hazards to life and health inherent in defective products that reach the market. It is evident that the manufacturer can anticipate some hazards and guard against the recurrence of others, as the public cannot. Those who suffer injury from defective products are unprepared to meet its consequences. The cost of an injury and the loss of time or health may be an overwhelming misfortune to the person injured, and a needless one, for the risk of injury can be insured by the manufacturer and distributed among the public as a cost of doing business. It is to the public interest to discourage the marketing of products having defects that are a menace to the public. If such products nevertheless find their way into the market it is to the public interest to place the responsibility for whatever injury they may cause upon the manufacturer, who, even if he is not negligent in the manufacture of the product, is responsible for its reaching the market. However intermittently such injuries may occur and however haphazardly they may strike, the risk of their occurrence is a constant risk and a general one. Against such a risk there should be general and constant protection and the manufacturer is best situated to afford such protection.</blockquote>

Traynor's argument for imposing strict liability in Escola "has had an enormous impact on the way legal scholars have understood products liability and tort law more generally". The year after Greenman, the Supreme Court of California proceeded to extend strict liability to all parties involved in the manufacturing, distribution, and sale of defective products (including retailers). In 1969, the court then held that such defendants were liable not only to direct customers and users, but also to any innocent bystanders randomly injured by defective products.

Nationwide adoption of product liability

In turn, Prosser was able to propagate the Greenman holding to a nationwide audience because the American Law Institute had appointed him as the official reporter of the Restatement of Torts, Second. The highest courts of nearly all U.S. states and territories (and a few state legislatures) embraced this "bold new doctrine" during the late 1960s and 1970s. North Carolina's judiciary never attempted to adopt the doctrine, and the state legislature enacted a statute expressly banning strict liability for defective products in 1995.

Before the product liability revolution, it was unheard of in American case law, for example, for a consumer to sue a ladder manufacturer after falling off a ladder or to sue a diving board manufacturer for diving injuries.

Factors behind nationwide adoption

In the conventional narrative, there are two main factors that explain the rapid embrace of Greenman and Section 402A. Between 1960 and 1977, Congress passed at least forty-two laws dealing with consumer and worker safety. Second, American academic experts in the field of law and economics developed new theories that helped to justify strict liability, such as those articulated by Guido Calabresi in The Costs of Accidents (1970).

To this, Kyle Graham adds three more factors: (3) the rise of attorneys specializing exclusively in plaintiffs' personal injury cases and their professional associations like the organization now known as the American Association for Justice; (4) the ubiquity of so-called "bottle cases" (personal injury cases arising from broken glass bottles) before aluminum cans and plastic bottles displaced glass bottles as the primary beverage container during the 1970s; and (5) the resistance of the Uniform Commercial Code's editorial board to extending warranties to bystander victims before 1966—in states whose legislatures had not already acted, state courts were more receptive to extending the common law to grant bystanders a strict liability tort claim. Since the "unreasonably dangerous" qualifier implicitly connotes some sense of the idea of "fault" which Traynor was trying to exorcise from product liability, They failed to foresee the logical implications of applying the rule to other types of product defects. These numbers reflect only a small portion of the 1980s explosion in product liability cases; the vast majority of American lawsuits are heard in state courts and not federal courts.

The explosion in product liability cases was widely blamed for causing a 1986 crisis in the availability of liability insurance for American businesses. For the first time, by the end of 2018 more than half (51.9%) of all pending American federal civil cases had been centralized into MDLs, with 156,511 cases in 248 MDLs out of a total of 301,766 civil cases.), and the most extensive right to discovery in the world. American reported cases are replete with plaintiffs whose counsel artfully exploited this standard to obtain so-called "smoking gun" evidence of product defects and made defendants pay "a tremendous price" for their callous disregard for product safety. However, the majority of states left untouched the basic rule of strict liability for defective products, and all efforts at the federal level to enact a uniform federal product liability regime were unsuccessful. Risk-benefit analysis, of course, can be seen as a way of measuring the reasonableness of the defendant's conduct—or in other words, negligence. A neo-conservative turn among many American courts and tort scholars during the 1980s led to a recognition that liability in design defect and failure-to-warn cases had never been entirely strict, or had been operating in some respects as a de facto fault-based regime all along, This attempt to resurrect negligence and to limit strict liability to its original home in manufacturing defects "has been highly controversial among courts and scholars." In arguing in 2018 that U.S. product liability law as restated in 1998 had come full circle back to where it started in 1964, two law professors also conceded that "some courts" continue to "tenaciously cling[] to the rationale and doctrine of [Section] 402A."

Types of liability

Section 2 of the Restatement (Third) of Torts: Products Liability distinguishes between three major types of product liability claims:

Manufacturing defect
Design defect
Failure to warn (also known as marketing defects)

However, in most states, these are not legal claims in and of themselves, but are pleaded in terms of the legal theories mentioned above. For example, a plaintiff might plead negligent failure to warn or strict liability for defective design.

The three types of product liability claims are defined as follows:

Manufacturing defects are those that occur in the manufacturing process and usually involve poor-quality materials or shoddy workmanship. In other words, the defective product differs from the others on the same assembly line and does not conform to the manufacturer's intended design.

Theories of liability

In the United States, the claims most commonly associated with product liability are negligence, strict liability, breach of warranty, and various consumer protection claims.

Breach of warranty

Warranties are statements by a manufacturer or seller concerning a product during a commercial transaction. Warranty claims historically required privity between the injured party and the manufacturer or seller; in plain English, they must be dealing directly with one another. As noted above, this requirement was demolished in the landmark Henningsen case.

Breach of warranty-based product liability claims usually focus on one of three types:

Breach of an express warranty,
Breach of an implied warranty of merchantability, and
Breach of an implied warranty of fitness for a particular purpose.

Express warranty claims focus on express statements by the manufacturer or the seller concerning the product (e.g., "This chainsaw is useful to cut turkeys").

The various implied warranties cover those expectations common to all products (e.g., that a tool is not unreasonably dangerous when used for its proper purpose), unless specifically disclaimed by the manufacturer or the seller. They are implied by operation of law from the act of manufacturing, distributing, or selling the product. Claims involving real estate (especially mass-produced tract housing) may also be brought under a theory of implied warranty of habitability.

Negligence

A basic negligence claim consists of proof of

a duty owed,
a breach of that duty,
the breach was the cause in fact of the plaintiff's injury (actual cause)
the breach proximately caused the plaintiff's injury.
and the plaintiff suffered actual quantifiable injury (damages).

As demonstrated in cases such as Winterbottom v. Wright, the scope of the duty of care was limited to those with whom one was in privity. Later cases like MacPherson v. Buick Motor Co. broadened the duty of care to all who could be foreseeably injured by one's conduct.

Over time, negligence concepts have arisen to deal with certain specific situations, including negligence per se (using a manufacturer's violation of a law or regulation, in place of proof of a duty and a breach) and res ipsa loquitur (an inference of negligence under certain conditions).

Strict liability

Rather than focus on the behavior of the manufacturer (as in negligence), strict liability claims focus on the product itself. Under strict liability, the manufacturer is liable if the product is defective, even if the manufacturer was not negligent in making that product defective.

Under a strict liability theory, the plaintiff merely needs to prove:

the defendant manufactured, distributed, or supplied a product;
the product was defective;
the defect caused injury to the plaintiff; and
as a result, the plaintiff sustained damages.

Consumer protection

In addition to common law remedies, many states have enacted consumer protection statutes that provide specific remedies for certain specific types of product defects. One reason for the appearance of such statutes is that under the "economic loss rule", strict liability in tort is unavailable for products that cause damage only to themselves. In other words, strict liability is unavailable for defects that merely render the product unusable (or less useful), and hence cause only economic injury, but do not cause personal injury or damage to other property.

Europe

Although European observers followed Greenman and Section 402A "with great interest", European countries did not initially adopt such a doctrine. For example, after the landmark case of Donoghue v Stevenson [1932] (which followed MacPherson), UK product liability law did not change any further for many decades, despite "trenchant academic criticism". Strict liability for defective products finally came to Europe as a result of the thalidomide scandal

The thalidomide scandal highlighted the need for a strict product liability claim sounding in tort because the affected infants were mere bystander victims, as distinguished from product buyers or users.

On July 25, 1985, the then-European Economic Community adopted the Product Liability Directive. In language resembling what Traynor wrote in Escola and Greenman, the Directive's preface states that "liability without fault on the part of the producer is the sole means of adequately solving the problem, peculiar to our age of increasing technicality, of a fair apportionment of the risks inherent in modern technological production." The Directive gave each member state the option of imposing a liability cap of 70 million euros per defect. Unlike the United States, the Directive only imposed strict liability upon "producers"—that is, manufacturers of raw materials, component parts, and finished products, as well as importers—and deviated significantly from the American model by deciding not to impose strict liability on purely domestic distributors or retailers.

Traditionally, European courts have provided no discovery or rather minimal discovery (by American standards). Where available, European discovery is rarely self-executing (that is, automatically effective by operation of law), meaning that the defendant and third parties have no obligation to disclose anything unless and until the plaintiff obtains a court order. For example, since 1968, it has been a crime for a French company to produce commercial information in foreign legal proceedings without express authorization from a French court, and in turn, this has been raised as a defense to discovery by French defendants in American product liability cases. Since the defendant usually possesses most of the extant evidence of a product defect, in most European countries it is "very difficult, if not impossible, for a victim or her lawyer to investigate a product liability case." As of 2020, the much smaller number of cases in the UK meant that "English case law ha[d] barely begun to consider" many of the product liability issues already explored thoroughly by American courts, which therefore required an English legal treatise to cite to a "significant proportion" of American cases in order to illustrate where English product liability law could go in the future.

During the late 2010s, the comparative outcomes for consumers affected by the Volkswagen emissions scandal vividly highlighted the deficiencies of European civil procedure as applied to a defendant who had already publicly admitted to violations of U.S. environmental laws. In the United States, Volkswagen quickly settled the consolidated consumer class action and agreed to pay US$11.2 billion directly to consumers affected by its allegedly defective diesel vehicles.

In 2024, Directive (EU) 2024/2853 on the liability for defective products repealed Council Directive 85/374/EEC and provided an expanded scope on product liability, now including components of products as well as software.

Other nations

The legislatures of many other countries outside the EU (then: EEC) subsequently enacted strict liability regimes based on the European model (that is, generally applying only to manufacturers and importers), including Israel (March 1980, based on an early proposed draft of the Directive), Brazil (September 1990), Peru (November 1991), Australia (July 1992), Russia (February 1992), Switzerland (December 1992), Argentina (October 1993), Japan (June 1994), Taiwan (June 1994), Malaysia (August 1999), South Korea (January 2000), Thailand (December 2007), and South Africa (April 2009).

As of 2015, in most countries outside of the United States and European Union, "product liability remains largely a regime of paper rules with little practical impact[.]"

Applicable law

The law that needs to be applied in product liability cases is governed by the Convention on the Law Applicable to Products Liability of 1971 for the 11 countries that are party to it. The country where the damage occurred determines the applicable law, if that country is also the residence of the person suffering damage, the principal place of business of the person held liable or the place where the product was bought. If that is not the case, the law of the country of residence is used, provided the product was bought there, or it was the principal place of business of the person held liable.

Debate over strict liability laws

Advocates of strict liability laws argue that strict products liability causes manufacturers to internalize costs they would normally externalize. Strict liability thus requires manufacturers to evaluate the full costs of their products. In this way, strict liability provides a mechanism for ensuring that a product's absolute good outweighs its absolute harm. Empirical data has shown that increased liability can force manufacturers to actively confront the risks imposed by their products. For example, at the peak of the liability insurance crisis in 1986, a survey of manufacturers found that because of expanding liability, 47 percent had withdrawn products, 39 percent had decided against introducing new products, and 25 percent had discontinued new product research. If they are substitutes, then either liability or regulation should be used. If they are complements, then the joint use of liability and regulation is optimal.

References

External links

Congressional Research Service (CRS) Reports regarding Product Liability
Product Liability Forum - British Institute of International and Comparative Law