Defective Products, Product Liability
In general, states follow a “stream of commerce” theory regarding liability for defective products. This means that anyone in the chain of distribution, including the retailer, can be liable for a defective product; however, retailer liability varies state-by-state. Some, such as New Jersey and Texas, have passed “innocent seller” legislation in an attempt to shield retailers from strict liability. In states where no such legislation has been passed, retailer liability depends on two things: the type of lawsuit that is brought, and whether indemnity is possible.
In negligence lawsuits for a defective product, the plaintiff must prove the retailer was negligent in supplying the dangerous product. Retailers have a duty to perform a cursory inspection of the goods they receive before placing them into the stream of commerce, but no duty to inspect for latent defects. To prevail in a negligence suit, the plaintiff has the difficult task of proving that the retailer did not inspect the goods. If duty to inspect is fulfilled, it is unlikely that the retailer will be held liable for injuries caused by the defective product. However, if the retailer had knowledge or should have had actual or implied knowledge of the defect, for example, due to a recall, they may be liable for any harm which resulted.
Retailers should perform a cursory inspection of goods before selling them, but they are not required to inspect latent defects.
In strict liability lawsuits, it is more likely for the retailer to be held liable. Any seller in the chain of distribution, including the retailer, can be held liable if it is proven that the product is unusually dangerous. Unlike negligence and breach of warranty claims, the injured only needs to prove the product was defective; the defect existed when it was sold; and the defect caused the alleged injury. The Model Uniform Product Liability Act of 1979 (MUPLA) sets the suggested standards for responsibility of retailers, exempting them from strict liability unless the court lacks jurisdiction over the manufacturer or the manufacturer is facing insolvency. If this is not the case, a retailer can only be liable for its own negligence or breach of express warranty. So far, 24 states have passed legislation modeled off the MUPLA. However, in states that have no such safeguard for retailers, indemnification may be the best route to escape liability. Breach of warranty, whether implied or express, can also serve as the basis for a claim against a retailer. When a retailer puts a good up for sale, there are two implied warranties that apply and, if breached, can leave a retailer vulnerable. The implied warranty of merchantability is a “guarantee that the product is reasonably fit for the purpose for which it was sold.” The implied warranty of fitness provides that when purchasing an item for a non-ordinary use, the seller/retailer possesses the knowledge and expertise about the product on which a buyer relies in purchasing the product. If a product is purchased and fails to perform in the manner in which it was intended, and an injury is suffered, the aggrieved may be entitled to recover damages that are the actual and proximate cause of the breach.
There are two ways a retailer can approach indemnification. The first is a proactive step– including an indemnification clause in the contract between the retailer and, most commonly, a wholesaler which supplies the goods. The clause would expressly state that the wholesaler (or manufacturer) would assume all responsibility and liability for damages caused by their negligence or wrongdoing. The second is seeking indemnity after a suit has been brought against the retailer. In Florida, where my practice is located, the retailer must prove that they are without fault, and any liability is vicarious and from the wrong of another. Additionally, the indemnification can only come from the party who was at fault. If a retailer is sued for a defective product, they can seek indemnification from the wholesaler who sold them the product, and then the wholesaler can proceed to seek indemnity from the manufacturer.
One thing that could potentially benefit retailers, and others in the chain of distribution, is time. Most states have statutes of limitations that bar claims after a certain number of years. Additionally, some states, such as Florida, have statutes of repose which limit the amount of time in which a claim may be brought, under certain circumstances. Florida’s statute of repose provides that “under no circumstances may a claimant commence an action for products liability…to recover for harm allegedly caused by the product with an expected useful life of 10 years or less, if the product caused the harm more than 12 years after delivery of the product to its first purchaser….” In some cases the statute of repose will preempt the statute of limitations, giving the injured party a smaller window to sue and providing retailers with a little breathing room.
Products liability insurance is a proactive step retailers can take to protect themselves from a defective product lawsuit. This type of insurance covers the retailer in the event that they sell a defective product which causes an injury. It is recommended that anyone involved in the manufacture, design, or sale of a product or good carry product liability insurance as a safeguard against lawsuits.
Most states follow the theory of “enterprise liability,” where anyone in the chain of distribution who profits from the sale of the product can be held liable for damages caused by defects—with or without knowledge of the defect. The retailer is often the first party and injured plaintiff will go after because they are the most attainable. Negligence cases are difficult to prove against retailers; and indemnity from parties higher up the chain of distribution can be sought in strict liability cases. It is possible for retailers to be liable for a defect in a product they sell. The suit will hinge on whether they fulfill their duty to inspect for obvious defects; how they have prepared themselves for legal recourse; and how they handle indemnity after a suit has been brought against them.
About the Author: James Magazine is a Certified Trial Attorney who specializes in personal injury, wrongful death, and insurance bad faith claims. Mr. Magazine is admitted to practice in the Middle and Southern District Courts in Florida, the 11 th Circuit Court of Appeals, and the United States Supreme Court. For more information, please visit http://www.lgmlawgroup.com/ .
Originally published on LawyerCentral by James Magazine on March 20, 2013 Read the original (Internet Archive).