A product lawsuit can completely destroy a company, even when the complaint is entirely frivolous. Every year, defective, faulty, or misused products cause serious injuries, property damage, business interruption, and oftentimes negative publicity and loss of goodwill.
Making sure your product is safe from risks can seem like an overwhelming task. However, the earlier in development and production you address these risks, the greater the ability to protect yourself against potential liability claims.
Here are five steps to incorporate into your liability protection plan:
- Start Early. Risks can usually be eliminated or controlled in the product design phase. Consider how a product will be used and the kind of hazards that may result, and ensure that warnings and instructions adhering to government safety standards are prominent and easily understood.
- Transfer risk. Avoiding financial vulnerability to damages and claims caused by others is a no-brainer. However, without effective risk transfer, the decisions of risk are often made after the fact – in court. Document these decisions in writing and at the onset of a business relationship to ensure that your suppliers are contractually responsible for their own negligence and/or errors and omissions in the case of a claim. Statements of financial responsibility, such as a certificate of insurance, will help you avoid bearing financial responsibility for product-related claims.
- Manage goods and supplies. If your company imports products or raw materials, you are likely responsible for verifying that products comply with industry standards and government regulations. Try to gather pertinent information from suppliers that may be needed in the event of a claim.
- Document, document, document. Establish documentation policies to meet regulatory requirements. For example, keep copies of customer design specifications and product orders, including customer signoff on final prototypes. Develop written procedures and instructions describing the flow of the product through the manufacturing process and quality control steps.
- Don’t ignore customer feedback. You’d be surprised to find out how many Incidents could have been avoided had manufacturers or distributors reviewed the complaints from their customers. Heed all the feedback you receive, and make it easier for them to share their concerns . This will help your company respond to consumer satisfaction needs and create opportunities for improving your products and services.
For more information on how to manage your product liability risks, contact us at 845-986-1177.
Related: Product Recalls: Are You Covered?