In February, I attended the Defense Research Institute’s (DRI) annual product liability conference in Las Vegas. One of the conference topics was the recall of products that are suspected to be dangerous, which may apply to a significant number of manufacturers at some point in the company’s operations. I previously wrote a blog post on the need for manufacturers to establish internal guidelines for situations where the manufacturer finds out that their product has been involved in an accident or incident. It is important that such guidelines exist, and it is important to not only understand the manufacturer’s possible duty to warn users of any safety concerns with the product, but also the fact that this often involves situations where it is difficult to draw distinctions, which should be assessed very carefully.
The matter is problematic, among other reasons, because in some cases the manufacturer may have a statutory duty to warn, but sending a public safety notice will always, at least to some extent, cause damage to the company’s reputation and lead to costs. Manufacturers are understandably reluctant to send safety notices ‘just in case’. The threshold and content of a manufacturer’s duty to warn can also vary by market.
For this reason too, each accident, near-miss situation, and fault report should be analysed carefully. Failure to comply with the duty to warn can in fact lead to very significant compensation obligations not only in the US, but also, for example, in the EU. In addition, the EU Low Voltage Directive, among others, obligates manufacturers to notify the authorities of safety concerns – the Finnish Electrical Safety Act also penalises failure to comply with this obligation. In the UK, failure to comply with the obligation to warn can be viewed as amounting to ‘corporate manslaughter’, and this can lead to very large fines. On the other hand, it is worth remembering that some situations may not reach the warning threshold, in which case warning – not to mention product recall – could result in major losses for the manufacturer as both direct costs and a damaged reputation.
So when does the duty to warn apply? It is very difficult to present an accurate, universal guideline, and, for example, in the US, the exact content of the duty varies from state to state. However, for example, in the state of New York, the duty to warn has been considered to depend, among other things, on the degree of risk posed by the product, the number of known accidents or incidents, the burden that warning imposes on the manufacturer, and, on the other hand, on the possibility of tracing the product and the burden this imposes on the manufacturer. Meanwhile, the Finnish Electrical Safety Act provides that if there is reason to suspect that the electrical equipment presents a risk, the manufacturer must inform the authorities immediately. It is noteworthy that in the US manufacturers may also – especially regarding consumer products – have a duty to inform the authorities of problems, and failure to do so may lead to million-dollar fines.
In the event that the manufacturer becomes aware of an accident or incident, it is highly recommended that the manufacturer analyses the conditions described above in depth. Warning users may also not be considered a sufficient measure; in some cases, it is necessary for the manufacturer to take corrective action. This is often recommended even in cases where an actual incident or fault has not yet occurred, but there is reason to suspect the possibility of a systematic fault. In situations where the problem can be corrected without retraction, corrective action may help avoid the damage caused by recall. This further underscores the need to analyse each fault or incident that the manufacturer becomes aware of. It is also important to remember that product manuals are considered part of the product, and if it turns out that an incident may have been caused by an error or shortcoming in the manuals, these should be updated immediately. The duty to warn can also be considered to apply to these situations, and updated manuals must be sent to all known buyers.
On the whole, these are issues involving very complex distinctions, and therefore the importance of taking matters seriously cannot be over-emphasised.