By Kimberly Grizzle, Missouri Enterprise Area Business Manager
We have all heard the saying or possibly even used it ourselves, “America is a lawsuit happy nation.” This raises the question, “Does anyone take responsibility for their own actions anymore…or is it always someone else’s fault?”
Each year, thousands of product liability cases are filed in the U.S. against companies alleged to have sold defective or unsafe products to the public. Some of these are questionable, but there are also plenty of legitimate product liability cases where the product was indeed defective or unsafe. Whether legitimate or not, any product liability action against your company can cost substantial amounts of time and money.
Think about the controversy over the McDonald’s hot coffee personal injury lawsuit, and the 6-figure settlement McDonald’s was ordered to pay the claimant. I think the general reaction to the judgement in this case was shock over the settlement!
Here are some more examples of personal injury/product liability lawsuits filed within our courts…where the judicial system ruled in favor of the plaintiff and companies were forced to pay.
Merv Grazinski owned a Winnebago Motor home. On a trip home from an Oklahoma University football game, Grazinski got on the freeway, set the cruise control at 70 mph and calmly left the driver’s seat to go into the back and make a cup of coffee.
Not surprisingly, the RV left the freeway, crashed and overturned. Grazinski sued Winnebago for not advising him in the owner’s manual that he could not actually do this.The jury awarded him $1,750,000 plus a new Winnebago Motor home. The company ultimately changed their instruction manuals.
In another case, consumers sued W.M. Wrigley Jr., claiming the chewing-gum maker made misleading advertising claims about the germ-killing properties of its product, Eclipse. Wrigley agreed to pay more than $6 million to a fund to reimburse consumers up to $10 each for the product and cover the costs of the settlement. The Chicago-based company also changed its marketing claims.
Yet another case involved a company, Blitz USA, who was once one of the largest producers of portable gas cans in the United States. Although there were fewer than two incidents reported for each million cans sold, the company faced repeated lawsuits with settlements and legal fees exceeding millions of dollars. Ultimately, Blitz USA closed its doors in 2012, costing the small town of Miami, Oklahoma, more than 100 manufacturing jobs, a significant loss for this small town.
Although the first two examples may sound almost humorous and might seem to defy common sense, all three examples illustrate how important it is for companies to protect themselves and insure against product liability.
The Bureau of Justice Statistics reported that in 2005 (the most recent data available), there were 26,950 tort, contract and real property trials in state courts of general jurisdiction nationwide. Of these civil trial cases, juries decided 68 percent, suggesting that more than 30 percent of these nearly 27,000 cases were settled before going to trial. Here are some additional facts about product liability lawsuits gleaned from this data:
In 76 percent of jury trials, individuals sued other individuals or businesses.
- In 54 percent of jury trials, the jury found in favor of the plaintiff.
- The median total award for a plaintiff winner in a jury trial was $30,500.
- In 6.3 percent of jury trials, the plaintiff winner was awarded $1 million or more in compensatory and punitive damages.
Obviously, manufacturers face unique risks and need to protect themselves against the potential consequences of product liability. The proper insurance coverages, designed to meet the specific company needs, are critical to ensuring the long-term survival of the business. Two key questions manufacturers should ask themselves
- If your company unknowingly sold defective or unsafe products to consumers…are you protected?
- Does your company have the protection it needs to survive if you are named as the defendant in a product liability lawsuit?
If you cannot quickly and confidently answer “Yes” to these questions, perhaps it’s time to have a conversation with your trusted insurance advisor, and review your insurance coverages.
Whether your company is guilty or not, the costs of inadequately protecting yourself against product liability lawsuits can result in the demise of even the most stable business.
Kimberly Grizzle, Missouri Enterprise Area Business Manager