16 Product Liability Chapter Key Points Understand the tort of negligence—its elements, types and defenses Understand both express and implied warranties Understand the purposes behind the development of the tort of strict liability, as well as its coverage, defenses and limits Identify current product liability issues here and abroad

Negligence Negligence is a breach of the duty of due care: the failure to do what a reasonable person would do or doing what a reasonable person would not do. The plaintiff must prove each of the following elements: Duty—That defendant owed a duty of due care to the plaintiff, under the “reasonable” person standard. A reasonable person is one who acts prudently, sensibly and responsibly under the circumstances. Breach of duty—That defendant breached the duty of due care. The breach may result from either the commission of a careless act or the omission of a reasonable, prudent act. Causation—Both of the following: Actual cause: Did defendant’s breach in fact cause the harm in question? This is known as the “but for” test. Proximate cause: Is defendant’s conduct sufficiently connected to the injury as to justify imposing liability? Injury—Plaintiff must have sustained injury (which courts often require to be physical). Example: Palmer v. Nan King Restaurant (N.H. 2002) McGraw-Hill © 2004 The McGraw-Hill Companies, Inc. All rights reserved.

Classes of Negligence Claims: Manufacturing Defects Improper manufacturing of products often gives rise to negligence claims. Example: Hot coffee from McDonald’s In rare cases, plaintiff need not prove manufacturer’s negligence. Under res ipsa loquitur, the plaintiff must instead prove— The injury was caused by an instrumentality under the control of defendant, The accident ordinarily would not happen absent the defendant’s negligence, and There is no evidence of other causes. McGraw-Hill © 2004 The McGraw-Hill Companies, Inc. All rights reserved.

Classes of Negligence Claims: Design Defects Negligence law requires that manufacturers think about designing products to anticipate and avoid consumer injury. Two principal lines of analysis have emerged: The risk/utility test holds that a product is negligently designed if the benefits of a product’s design are outweighed by the risks that accompany that design. The consumer expectations test imposes on the manufacturer a duty to design its products so that they are safe not only for their intended use but for any reasonably foreseeable use. Example: Marilyn Merrill v. Navegar (Cal. 2001) McGraw-Hill © 2004 The McGraw-Hill Companies, Inc. All rights reserved.

Classes of Negligence Claims: Inadequate Warnings A negligence claim may arise from a supplier's failure to warn of a danger associated with the product. Issues include: Whether the supplier knew or should have known that the product could be dangerous in its foreseeable use The feasibility of an effective warning The probable seriousness of the injury Example: Brown Forman Corp. v. Brune (Tex. App. 1994) McGraw-Hill © 2004 The McGraw-Hill Companies, Inc. All rights reserved.

Negligence Defenses Comparative Negligence: The weighing of the relative negligence of the parties. Typically plaintiff’s recovery is reduced by a percentage equal to the percentage of plaintiff’s fault. When plaintiff’s fault actually exceeds that of defendant, plaintiff may be barred from any recover. Contributory Negligence: A few states continue to follow the historic rule that any contribution by plaintiff to his or her own harm constitutes a complete bar to recovery. Assumption of Risk: In many states, a plaintiff who willingly enters a dangerous situation and is injured will be barred from recovery. Defendant must show that plaintiff knew of the risk and voluntarily assumed it. Increasingly, states that have adopted the comparative negligence doctrine treat assumption of risk as simply a factor in negligence balancing. McGraw-Hill © 2004 The McGraw-Hill Companies, Inc. All rights reserved.

Express Warranties An express warranty exists if a seller of goods states a fact or makes a promise regarding the character or quality of the goods. They are created by: Any affirmation of fact or promise that becomes part of the basis of the bargain. Any description of the goods which is made part of the basis of the bargain. Any sample or model creates an express warranty that the whole of the goods shall conform to the sample or model. Sales talk or puffing does not create an express warranty. An expert’s opinion may create an express warranty because the buyer should reasonably be able to rely on the expert’s affirmations, particularly if the buyer is not knowledgeable about the product. McGraw-Hill © 2004 The McGraw-Hill Companies, Inc. All rights reserved.

Implied Warranties By operation of law, an implied warranty automatically attaches to the sale of goods. There are two types: Merchantability—That is, that the goods will be safe for their intended purpose and of at least ordinary quality. Fitness for a Particular Purpose—That is, where the seller has reason to know any particular purpose for which the goods are required and that the buyer is relying on seller’s skill or judgment to select suitable goods, there is an implied warranty that the goods shall be fit for such purpose. McGraw-Hill © 2004 The McGraw-Hill Companies, Inc. All rights reserved.

Disclaimers Express warranties may be disclaimed or modified only with great difficulty. Implied warranties may be excluded or modified by the following: Any disclaimer of merchantability must mention merchantability and, in the case of a writing, must be conspicuous. Any disclaimer of fitness for a particular purpose must be by a writing and conspicuous. McGraw-Hill © 2004 The McGraw-Hill Companies, Inc. All rights reserved.

Strict Liability Definition: One who sells any product in a defective condition, unreasonably dangerous to the user or consumer, is subject to liability for physical harm caused thereby if: The seller is engaged in the business of selling such a product and The product is expected to and does reach the user without substantial change in the condition in which it is sold. Coverage: The rule applies— Even though seller has exercised all possible care. Even where the user has not bought the product from or entered into any contractual relation with the seller. To all those in the distribution chain, from manufacturer through ultimate retailer. Policy: To place the burden and cost of injury on those in the chain of distribution (which can both insure for and spread the cost), rather than imposing the entire burden on the injured user. Example: Price v. BIC (N.H. 1997) McGraw-Hill © 2004 The McGraw-Hill Companies, Inc. All rights reserved.

Defenses to Strict Liability Assumption of risk and product misuse are both good defenses and, in many states, can act as a complete bar to strict liability recovery. Since strict liability is a no-fault theory, contributory negligence ordinarily is not a recognized defense. Example: Charlton v. Toyota Industrial Equipment (Penn. 1998) McGraw-Hill © 2004 The McGraw-Hill Companies, Inc. All rights reserved.

Limits of Strict Liability— Market Share Liability? Issue: In some circumstances, plaintiff might not know exactly which defendant caused the injury. For example, in DES cases, because of the passage of time, the loss of records, and the large number of manufacturers, the plaintiff/daughters ordinarily cannot identify the specific manufacturer responsible for the defective drug ingested by their mothers. Response: A few courts have assigned liability based on defendants’ market shares at the relevant time. Example: Sutowski v. Eli Lilly & Company (Ohio 1998) McGraw-Hill © 2004 The McGraw-Hill Companies, Inc. All rights reserved.

Tort Reform? Pro: Tort costs are about 2.2% of America’s GDP. In New York City the cost of tort settlements and judgments increased by 2,500% from 1978 to 2001 ($78 million to $557 million) while the cost of living rose by 175%. Product liability has been estimated to represent about $100 of the cost of a $200 football helmet, $500 of the cost of a new car, and $20 of the cost of a $100 ladder. Con: Only 10% of those injured by dangerous and defective products actually file lawsuits. Total product liability verdicts and settlements for manufacturers in 1993 amounted to $4.1 billion, which “is less than what Americans spend annually on dog food.” Highly publicized cases sometimes turn out simply to be fabrications that make a good story. Some are apparently made up and then circulated on the internet. McGraw-Hill © 2004 The McGraw-Hill Companies, Inc. All rights reserved.

Product Liability in Other Countries The Tillinghast international consulting firm compared tort costs in the U.S. with those in Denmark, the U.K., Japan, Canada, France, Switzerland, Spain, Belgium, West Germany and Italy: Our total tort system costs were estimated at $132 billion or 2.2% of our GDP, while the estimated average cost for the other nations was .9% of GDP. Question: To evaluate these numbers, do we need to know the percentage of GDP each country spends on consumer goods? Reading: “Stand Up and Fight” (Japan’s product liability law) McGraw-Hill © 2004 The McGraw-Hill Companies, Inc. All rights reserved.