Product Liability Exposures

Companies have a duty to protect consumers from potential hazards, even if the end user is negligent or deliberately misuses the product. In fact, courts hold manufacturers to a higher standard because they have a more intimate knowledge of their products. This means that the manufacturer assumes financial responsibility for injuries and property damage.

Product liability cases in the machine tool world generally involve design flaws. These are difficult to prove, and it is standard that everyone in the supply chain will be named in the lawsuit, so everyone from the engineers to the companies that package and transport the product will likely be named.

Many shops are expanding their scope of business to try and maintain and enhance sales. When shops diversify and step outside the box, new opportunities are created. With new opportunities come new exposures.

Your company probably has a regimented process of “sign-offs,” and it may be ISO-designated, so you are likely doing many things to reduce your exposure - documenting your processes and implementing written policies and procedures to ensure your staff always follows the same best practices.

In a court of law, the “reasonable man’s defense” is used as a measuring tool. The court will compare your behavior to what another person would have done if he were in your shoes. If you can show that you went above and beyond what any reasonable person would have done in the same circumstances, this greatly helps your company create a better defense.

Following are some precautions to consider:

1. Document. Ensure that everyone’s work is being inspected and that cross inspections are done.

2. Test. Whether it is done on your vendor’s incoming components, subassemblies, or finished products, perform tests on all parts and document all results.

3. Identify. Insurance companies reward shops whose work is traceable by charging less money on liability insurance premiums.

4. Record. Collecting and analyzing data can serve to be key points if you are ever put in the position of having to defend yourself.

5. Store. Maintaining records for a reasonable period of time is essential. Some industries, such as automotive, expect you to keep your records for parts made for more than a decade. How good is your recordkeeping, and can you easily find work done from the past if required?

6. Record Complaints. You may not be used to getting any, but what procedures do you follow in the event this happens? Do you have written documentation of all customer complaints?

7. Maintain. Make sure your maintenance is being recorded and easy to prove.

Refurbished Products

A greater exposure is involved when doing repair work, because it is tougher to prove what work has been done and where responsibility lies.

If you are refurbishing your customer’s property, ask yourself these questions.

• Do I take a picture of the property (not using a digital camera) to have on file of the property before and again after the repair?
• Do I have the customer sign a release stating that the part was repaired to its satisfaction and it has done an inspection on it?
• Do I document a general description of the part, and am I in a position to identify my work or prove what I have done and not done? Would I be able to identify the work I have done to that part once that part or die has left my shop?
• Do I record which parts were replaced and the condition of the parts?
• Do I reattach any safety labels or include documentation that tells my client to do this?
• When I do repair work for a customer I am now a bailee, which means I am responsible for this part because it is in my care, custody, and control.

Review your work orders and state you will not be held responsible (hold harmless) for this property.

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