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concern for manufacturers

Product liability ongoing
concern for manufacturers

What if the company that purchases the drapes doesn’t sterilize them properly, subsequently wreaking havoc in operating rooms? Innovation Packaging would be an innocent bystander, having relinquished any liability responsibility when the product was sold to the kit maker, right? Wrong.
“As a supplier twice removed, you’d think you’d be reasonably protected,” says Hachigian. “But every supplier can get involved (in liability lawsuits).”
Indeed, William Smith, general counsel for Graham Manufacturing Co. Inc. in Batavia, says that legislation enacted in the 1960s makes any manufacturer in a chain of distribution potentially liable for damages caused by a specific product.
“Defendants in a personal-injury suit can have as little as 1 percent of the responsibility for the event that created the liability, but could end up with 100 percent if the others can’t pay,” Smith says.
In May 1996, President Bill Clinton vetoed the Product Liability Fairness Act, a bill submitted by Congress that attempted to protect manufacturers from liability by imposing a cap on the amount of money juries can award for punitive damages. It also sought to limit the time frame in which plaintiffs could sue a manufacturer for product liability.
Even had it been approved, legal experts say, the legislation would have had little effect on local product-liability litigation because punitive-damage awards are rare.
“There are not that many punitive damages awarded,” says Dominic Pellegrino, a Rochester attorney in private practice. “It’s only the big ones (punitive damages) that get in the news. Even those often get reduced or eliminated in the appellate courts. Locally there are very few cases where punitive damages are awarded and stick.”
In 20 years of practice, Pellegrino has handled roughly 10 product-liability cases, one of the few ways, he believes, that consumers can have a direct impact on product safety.
“If a product is defective, the manufacturer is liable. When you take away damages, you take away one of the incentives for the manufacturer to put out a safe product,” Pellegrino says.
Proving punitive damages is no easy task, he notes. Plaintiffs must prove that manufacturers exhibited intentional recklessness and blatant disregard for the product user’s safety.
According to the Association of Trial Lawyers of America, manufacturers’ claims that liability-protection costs are behind significant product price increases are hogwash. Information compiled by the Consumer Federation of America, and supplied by ATLA, indicates that the cost of product liability is 26 cents for every $100 purchase.
Pellegrino agrees: “Manufacturers’ claims that costs become prohibitive because of the threat of punitive damages are overstated.”
Even though Graham Manufacturing makes vacuum-heat-transfer equipment, which is used in other manufacturing processes, Smith says the company rarely is directly affected by product-liability litigation. In fact, he recalls only one case where a worker performing an installation of Graham equipment got too close to a disk, made by another company and used in the Graham equipment. The disk ruptured, causing the worker’s death. Although Graham was one of the manufacturers cited in the original lawsuit, the disk manufacturer was found solely liable and Graham was relieved of any further responsibility.
But, Smith says, the indirect effects of a litigious climate are significant: higher insurance premiums, additional business-negotiation costs and modified employee behavior. Smith advises other manufacturing companies to review their insurance options frequently and to “do what you can to get indemnified by the other party.”
On the subject of modified employee behavior, two scenarios might apply: In one, the threat of increased liability influences employees to develop a safety mind-set when designing products. In another, as a result of attempts to acquire indemnification from customers, the company spends considerable time in the contract stage.
“Indemnification provisions go back and forth. It takes time, which is a cost not directly related to the product,” Smith says.
Damages paid involving medical products have ballooned in recent years, largely fueled by lawsuits against breast- implant manufacturers, which, in turn, spurred Congress to develop the now- vetoed Product Liability Fairness Act. According to an article in the April 1996 issue of Working Woman magazine, a skyrocketing volume of litigation against the breast-implant manufacturers– aggravated by astounding jury awards– resulted in the manufacturers agreeing to settle a global class-action lawsuit representing approximately 440,000 women for $4.25 billion.
According to David Ransom, a spokesman from ATLA, the recently vetoed bill would have created an inequity in plaintiff damage awards, basically by increasing economic losses–loss of income and coverage for any medical expenses–and diminishing non-economic losses– losses due to pain and suffering, and for what can’t be done as a result of an injury.
Ransom says the people who would have been grossly affected by this are those who do not have a large economic loss, such as homemakers, children and older adults: “This (legislation) would (have affected) corporate executives differently from a homemaker for the exact same injury.”
Another ATLA criticism of the Product Liability Fairness Act was the time limit imposed on individuals wanting to bring suit. The bill presented to the president called for a 15-year time limit, oth- erwise known as a statute of repose. In other words, for farm and other heavy equipment built to last more than 15 years, individuals injured on day one after the 15-year limit could not sue the manufacturer for product liability.
As with most things, this issue has two sides, Hachigian notes. It is something illustrated by the fact that while this legislation was vetoed, its lessons live on.
“On the one hand, you want the recourse to go after professionals and suppliers; on the other hand, damages are out of whack,” Hachigian says. “We need to find a balance between suppliers doing their jobs and plaintiffs (having the) ability to collect for legitimate damages.”
(Mary Anne Donovan is a Rochester-area free-lance writer.)

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