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Products Liability (PL) & the Middle Market:A Programmatic Structure for Loss Control & Claims Defense Damon P. Schneider Consultant, Loss Control (SELC)
AGENDA The “big issues”. Risks from the past. Products liability in the news. Why is a structure / process needed? Programmatic elements. Products Liability – LC survey perspective. Conclusion.
The “big issues” Scalability of controls for the exposure. Confidence in agents to “field underwrite” & effectively pre-qualify risks with higher PL exposure. Internal recognition of issues (exposure, frequency, severity). Functional area staff support: (is there a “wheel”?) Underwriting Loss Control
Risks with varying levels of exposure Manufacturing: Beauty products. Dog food. Woven material for use in parachutes. Craft breweries. “Picker-packer-grower-shipper”. “Killers”- poultry processing industry. Wood frame wall systems (3 hr fire rating). Modular high rise construction.
PL “in the news” Liquid fuel gel. “Green” building & “energy mgmt” devices: Performance guarantees & LEED. “Smart” devices are making me sick (EMF?). Asbestos in engine gaskets (China / Australia). Exterior Insulation Finishing Systems (EIFS): IAQ, moisture intrusion, mold. Baby strollers – strangulation hazard: 8 yrs between death & official recall!
Why is a formal structure around PL needed?Identify/Evaluate:• Exposures / Hazards.• Assess the potential for loss.• Controls in place?• Develop Recommendations.Planned Service Approach:• Gather Facts.• Evaluate Facts.• Set a Plan of Action.• Recommendations.• Follow-through (P-D-C-A).
Why is a formal structure around PL needed?Active Participation:• Question.• Observe.• Maintain records.• Collaborate.
The 14 Basic Elements of a Products Liability Loss Control and Claim Defense Program1. Corporate Policy Statement.2. Products Loss Control Committee.3. Products Liability Coordinator.4. Product Design Review.5. Manuals & Procedures.6. Quality Control.7. Packaging & Shipping.
The 14 Basic Elements of a Products Liability Loss Control and Claim Defense Program8. Labeling & Instructions.9. Sales & Advertising.10. Recordkeeping Procedures.11. Complaint Analysis & Handling.12. Claim Analysis & Handling.13. Development of Expert Witnesses.14. Auditing Results.
1. Corporate Policy Statement Management commitment. Concise. Clear. Conveyed to all employees. “Produce the safest product possible”. Live the values (restate the policy) Motivate employees to comply.
2. Products Loss Control Committee Members Must be cross-functional & have management support / commitment: Management, Engineering, Purchasing, Manufacturing, Quality Control, Safety, Legal, etc. Activities: Review – Accident Reports, Test Results, New Products, Complaints, New Standards, QC & Safety. Frequency of Meetings: Based on need but … at least annual basis.
3. Products Liability Coordinator Position should be appointed by management. Authority to act & oversee is needed. They must be a conduit, not a bottleneck: Establish & maintain communication between functional areas. Measures results & document. Assess plans for recalls, retrofitting, alteration of product(s).
4. Product Design Review1. Defective Product – Strict Liability.2. Not Reasonably Fit for Purpose for Which It’s Sold/Used.3. Presents Condition Unreasonably Dangerous to User – or – Others.4. Defects Traced Back to Engineering and Research & Design.5. Consider Safety in All Aspects of Design/Development6. Document Alternative Designs.7. Design Considerations.8. Fit for Reasonably Foreseeable Use.9. Researched Thoroughly & Tested.10. Designed Not to Cause Accidents.
4. Product Design Review1. Adequate Safeguards.2. Misuse Considered.3. Environmental Conditions4. Reliability.5. Life Expectancy – All Components.6. Conform to Standards (ANSI, ASME etc.)7. State of the Art.8. Adequacy of Warnings of Dangerous Qualities.9. Wear & Tear.10. Installation, Operation & Maintenance Instructions Complete & Understandable .
5. Manuals & Procedures – Two Types 1. Within the manufacturing area: These establish the company policy, programs & operating procedures. Intended for the day-to-day operation of the company. 2. Product Manuals – Issued with Product Includes a Parts List: Assembly. Installation. Operation. Maintenance & Servicing Instructions.
6. Quality Control QC – Provides product/service that meets design parameters AND protects user by providing product fit for use. Conception - - Production - - Use. Effective QC Program will decrease (maybe eliminate) the marketing of product not fit for use.
11 Functions of a Quality Control (QC) Department 1. QC Manual: Policies & Procedures. 2. Engineering: Assist in R&D - Design Specs. 3. Supplier Quality: Conforms to Specs. 4. Manufacturing Quality: Instructions.
11 Functions of a Quality Control (QC) Department 5. Process Control: Processes change characteristics of the product. Six Sigma. 6. Calibration of measuring equipment. 7. Sample inspection: Lots numbered? Samples taken? Organization? 8. Non-conforming items: RJ Reynolds.
11 Functions of a Quality Control (QC) Department 9. Error /analysis & corrective action. 10. Preservation, packaging, shipping. 11. Records.
7. Packaging & Shipping (P&S) Special P&S considerations needed? Timely. Economical. Free from damage. Complete in its contents. Last line of defense: Proper training & quality personnel.
8. Labeling & InstructionsLabeling: Adequacy of information. Clear & succinct. Appropriate warnings? (GHS, instructions on container) Compliance with government regulations.Instructions: Provided with the product. Proper instructions for use. Highlights potential for misuse. Compliance with government regulations.
9. Sales & Advertising Primary contact: Owner & manufacturer. Presents accurate picture of user expectation. Product performance statements accurate: Reviewed by legal personnel & engineering staff. Over performance statements: “Fireproof”. “Bulletproof” - - really? Bullet resistant. Non-toxic. Are there hazards misrepresented/concealed? Illustrations of safety features Warranties/Guarantees made – Are they accurate?
10. Recordkeeping Document: Start to Finish … Why? . . “If it is not on paper, it is vapor!” Support potential claims defense. Retention (duplicates, samples?). What records should be kept?
11. Complaint Analysis & HandlingIndicators of performance: Under different environmental/ use conditions. Errors & abuses that occur. Potential for loss. Which components fail first? Fail frequently?Make the process easy! Encourage customers, dealers, manuf reps, service techs to report issues: Accidents. Malfunctions. Misuse. Abuse. Compatibility with components manuf by other companies.
12. Claim Handling We have developed a safe product … something went “sideways”. Now we have a claim! What do we do? Report to Claims Department. Obtain Product – Examine – Document. Cooperation with no admission. Apologize (studies show ….) Utilize expert witnesses. Is it a valid defect? – Recall/Retrofit/Replace.
13. Development of Expert Witnesses Manufacturers can be a source: There is also an extensive marketplace in this area. Opposing counsel WILL provide. Can be in-house or external. Verify credentials & technical knowledge. Credibility. Have they done this before?
14. Auditing Results Coordinate / disseminate to all company departments. Match to design standards & acceptable criteria. Management system auditors can verify the internal processes. Adopt a philosophy of continuous improvement.
Products liability – LC survey guideAre the following elements of the Product Liability program formal, informal or in place:1. Corporate Policy Statement YES NO NONE2. Products Loss Control Committee YES NO NONE3. Products Liability Coordinator YES NO NONE4. Product Design Review YES NO NONE5. Manuals & Procedures YES NO NONE6. Quality Control YES NO NONE7. Packaging & Shipping YES NO NONE8. Labeling & Instructions YES NO NONE9. Sales & Advertising YES NO NONE10. Record Keeping Procedures YES NO NONE11. Complaint Analysis & Handling YES NO NONE12. Claim Analysis & Handling YES NO NONE13. Development Expert Witnesses YES NO NONE14. Auditing Results YES NO NONE
Products liability – LC survey guide 19 General Questions in this 7 page survey guide along with supplements:• 13 questions - PRODUCT SAFETY PROGRAM / QUALITY CONTROL• 2 questions - COMPLAINT & INCIDENT PROCEDURES• 2 questions - WRITTEN MATERIALS Class-specific product liability considerations (5 sections)• 7 questions - FOOD PRODUCTS• 4 questions - CLOTHING MANUFACTURERS• 5 questions - MACHINE SHOPS / METAL GOODS MANUFACTURERS• 5 questions - FURNITURE MANUFACTURERS• 3 questions - ELECTRONICS / ELECTRICAL COMPONENT MANUFACTURERS
Conclusion PL is a “beast with many heads”… …but it can be tamed with education & experience. We need to collaborate to be effective with this line of business.