'Product story' vital in liability cases

by Nicole Sosnowski, KT Journalism

Australian lawyers defending product liability cases need to take a "broader view" to discover the global "product story", DibbsBarker partner Kelli Stallard says.

She told a product liability panel at the AILA-Queensland Law Society insurance law intensive there were potential global ramifications in product liability litigation. "What happens in Australia doesn't stay in Australia.”

Although lawyers may consider a claim relatively unimportant, they had to examine the "bigger picture" and speak to insurers and manufacturers to understand its global significance, Ms Stallard, a former AILA national president, said. Products were sold in multi-jurisdictional marketplaces, and could be sold and on-sold far and wide. That meant defence strategies for similar claims in other jurisdictions may already exist.

She said it was important lawyers found "the right person" to test the facts or establish a claim’s technical basis. "Expert evidence is key.” If necessary, lawyers should look globally to find experts specialising in the specific product field because overseas experts could help win cases in Australia.

Ms Stallard said the "Daubert test", commonly used in the US, was useful to remove "junk science" and determine experts' validity. The test considered:

  • whether an expert’s concept had been tested;
  • whether it had been subjected to peer review;
  • the known rate of error; and
  • whether the concept was accepted by the scientific community.

US jurors ‘need product stories’

Lorraine Gallagher, a partner at US-based Wilson Elser Moskowitz Edelman & Dicker LLP, told the session lawyers defending product liability cases in the US needed to give juries product stories, including the design and manufacturing process; use and misuse in the marketplace; and product use in the specific lawsuit.

The product story was communicated through corporate witnesses; reliable and authoritative expert witnesses; and a developed factual story. She said stories should be prepared even before any incident occurred.

Legal consultant Emroy Watson, who was Yamaha Motor Corporation USA's legal department general manager for 28 years, shared his lessons in product liability litigation.
It was important for lawyers to be well prepared. For example, lawyers should find any relevant government studies and international work on safety issues, because they could show evidence of defect and reinforce “failure to warn” claims in the US.

Lawyers should demonstrate how manufacturers addressed, or were addressing, potential safety issues through design, evolution and independent research.

Mr Watson said product recalls increased claim numbers and amounts, and could damage businesses' brands and reputation. But "it’s not all bad"; "cases can still be won" and there were opportunities to defend. He said recall was not necessarily evidence of defect; causation remained the key.


Product recall insurance 'evolving'

Liberty International Underwriters senior underwriter Donna Niblock said product recall insurance was an "evolving product" so underwriters should educate insureds about it.

She said there were more than 500 Australian product recalls in 2012 but, with increasing imports, it was sometimes difficult for insurers to recover damages from overseas suppliers.

Manufacturers and suppliers faced greater pressure to respond to growing mandatory reporting requirements, Ms Niblock said. Suppliers must report consumer goods associated with death or serious injury or illness to the Australian Competition & Consumer Commission if:

  • they became aware of any death, serious injury or illness; and
  • considered, or became aware another person considered, it was caused, or may have been caused, by its consumer goods.

Suppliers must submit reports within two days of becoming aware of reportable incidents.

Ms Niblock said the key reason insureds bought product recall policies was to cover adverse brand reputation risks. Although the public was generally forgiving if a company was upfront about a problem, "once a consumer loses trust, it’s hard for them to go back".

She said other product recall risk were consumer safety concerns, including regulatory investigations; supply chain issues, including contract losses; and financial hardship.

To reduce recall risks, companies should document and implement procedures down to the factory floor; regularly review supplier and customer contracts; and conduct mock recall exercises.

Ms Niblock said Liberty’s risk engineers frequently assessed product risks because insureds often failed to disclose sufficient information. Underwriters needed to know about products’ histories and complaints, she said.