MARKET AVAILABLE- EVOLUTION OF LEGISLATIVE FRAMEWORK- PRODUCT LIABILITY

LIABILITY.

Liability is an obligation that legally binds an individual or company to settle a debt. When one is liable for a debt, they are responsible for paying the debt or settling a wrongful act they may have committed. For example, if John hits Jane's car, John is liable for the damages to Jane's vehicle because John is responsible for the damages.

Liability Insurance.

Any type of insurance policy that protects an individual or business from the risk that they may  be sued and held legally liable for something such as malpractice, injury or negligence. Liability insurance policies cover both legal costs and any legal payouts for which the insured would be responsible if found legally liable. Intentional damage and contractual liabilities are typically not covered in these types of policies.

Liability insurance is very important for those who may be held legally liable for the injuries of others, especially medical practitioners and business owners. A product manufacturer may purchase product liability insurance to cover them if a product is faulty and causes damage to the purchasers or any other third party. Business owners may purchase liability insurance that covers them if an employee is injured during business operations.

There are many different types of insurance policies available, but liability insurance is one of the most popular because it costs much less than many other options. For example, in regard to auto insurance policies, liability insurance costs far less than full coverage. The reason for this is because full coverage insurance must pay for both your vehicle and any other vehicle involved in a collision, as well as property damage and medical expenses due to injuries to you or another party.

On the other hand, liability insurance is only responsible for the other party's losses. There are different types of liability insurance, including general liability, which works in much the same way as auto liability insurance, but covers businesses. General liability protects a company from third party claims. Aside from general liability, there is also D & O liability, employer liability, and professional liability insurance.

D & O liability stands for "directors and officers" liability and is intended to cover the acts or omissions of those in the director or officer position. An entire company should not be held liable for the statements, actions, failure to act, or other mistakes that are the responsibility of an officer or director.

Employer liability is also known as worker's comp, and it is a mandatory form of liability insurance coverage that all businesses must carry. While it sounds like it is intended to protect the employee, which it does to some degree, it is actually protection for the employer in case of injury, job related illness, or other damages for which the employee might sue the company.

Professional liability is similar to malpractice insurance, although the coverage may not be as comprehensive as some malpractice policies in different fields. The purpose for professional liability insurance is to protect those seen as professionals or "experts" in a given field, who may not be protected by general liability due to their expertise. When one is seen as a professional, he is held to a higher standard and is therefore often considered to hold greater liability towards his clients. Consequently, he needs more coverage than general liability insurance offers.

The simplest definition of liability insurance is insurance which protects a person or entity from claims initiated by another party.

PRODUCT LIABILITY

In India, Product liability law, also called “products liability”, governs the liability of manufacturers, wholesalers, distributors, and vendors for injury to a person or property caused by dangerous or defective products. The goal of product liability laws is to help protect consumers from dangerous or defective products, while holding manufacturers, distributors, and retailers responsible for putting into the market place products that they knew or should have known were dangerous or defective.

The responsibility of a manufacturer or vendor of goods to compensate for injury caused by defective merchandise that it has provided for sale.

When individuals are harmed by an unsafe product, they may have a Cause of Action against the persons who designed, manufactured, sold, or furnished that product. In the United States, some consumers have hailed the rapid growth of product liability litigation as an effective tool for Consumer Protection. The law has changed from caveat emptor ("let the buyer beware") to Strict Liability for manufacturing defects that make a product unreasonably dangerous. Manufacturers and others who distribute and sell goods argue that product liability verdicts have enriched plaintiffs' attorneys and added to the cost of goods sold.

Product liability insurance protects your business assets from legal proceedings for injury or property damage to third parties caused by your business activities or the products you supply. Manufacturers’ product liability insurance is particularly important due to the large numbers of people in contact with their products on a daily basis.

Civil Product liability in India is, essentially, governed by:

a) The Consumer Protection Act, 1986

b) The Sales of Goods Act, 1930

c) The Monopolies and Restrictive Trade Practices Act, 1969 (hereinafter referred to as the “MRTP Act”)

d) The law of Torts.

e) special statues pertaining to specific goods

The laws relating to product liability, in India, have been constantly evolving, by way of judicial interpretations and amendments, to become one of the most important socio-economic legislations for the protection of consumers. The legislation, in respect of product liability in India, though was enacted to protect the interest of consumers but the same was, earlier,

construed narrowly, thereby frustrating the object sought to be achieved. The trend, however, has changed in the recent times with the Courts adopting a pro-consumer approach. The Courts, in India, have now started awarding compensation and damages which are more punitive than compensatory in nature.

In Wheels World vs. Pradeep Kumar Khurana1 the complainant, a doctor by profession, complained to the respondent about deficiency in service in not repairing, free of charge, a technical fault, which occurred during warranty period, in his new Montana car and then not delivering the same for a period of 4 years. A sum of Rs. 30, 000/- with interest @ 18% per annum from 2/7/1988 to 7/5/1992, was awarded as compensation, in favour of the complainant for his suffering, both professionally and otherwise, on account of non availability of car for a period of 4 years. Further interest, at the same rate for the same period, was also awarded on an amount of Rs. 82, 000/-, being the price of the car as well as an amount of Rs. 55, 00/- towards costs and, last but not the least, an amount of Rs. 50, 000/-, which was deposited by the Respondent on account of stay of imprisonment, was also awarded to the petitioner.

The product liability law, in India, apart from the civil liability, also imposes criminal liability in case of non-compliance with the provisions of each of the below mentioned Acts. The said Acts are in addition to and not in derogation of any other laws in force, which implies that an action imposing penal liability can be simultaneously initiated along with a claim under civil law. Some of these are special Acts pertaining to sale of specific goods such as food, drugs, cosmetics etc.. The provisions of these enactments are preventive in form, though the relief envisaged is an action for breach in civil or criminal court.

The Foods Adulteration Act, 1954 The Food Safety and Standards Act, 2006 The Drug & Cosmetics Act, 1940 The Indian Penal Code, 1860 The Standards of Weights and Measures Act, 1956 The Agricultural Produce (Grading and Marking) Act, 1937 for marking and grading of

commodities like vegetables, butter, etc. The Indian Standards Institution (Certification Marks) Act , 1952 to formulate a number

of standards for different products by ISI The Bureau of Indian Standards Act , 1986

Each of the aforesaid Acts provides for imposition of fine and/or imprisonment in case of supply of defective products or adulterated consumables.

The Food Safety and Standards Act, 2006 is the most recent legislation which comprehensively deals with food and safety standards which are to be complied with by manufacturers and

1 MANU/CF/0280/2002

producers, non-compliance of which imposes a liability, upon defaulters, of fine, extending upto Rs. Ten Lakhs and/or imprisonment.

The provisions of Indian Penal Code (IPC), on the other hand, in respect of product liability, are attracted when the element of cheating and fraud can be attributed to such defects. For example, in the case of Smt. Uma Deepak v. Maruti Udyog Ltd Ors2 the Complainant alleged that the car sold by the opposite party was not only accidental but the price, for the same, was also overcharged. The Court, in response to the allegations made by the complainant, directed arrest of the Directors as well as the manager of the dealers/agents who sold the said defective car to the complainant and remanded them to judicial custody. Subsequent thereto, the said officers of the opposite party were released on bail and were directed to replace the disputed car with a new car.

Provisions of IPC are also attracted to provide punishment to offenders for false weights and measures , adulteration of goods ( food, drugs etc -6 months imprisonment, fine of 1000 rupees or both), and false property marks ( one year imprisonment, fine or both). The period of limitation as per Section 468 of the Criminal Procedure Code is 6 months if offence is punishable with fine only , and one year if offence is punishable with upto one year imprisonment and three years if offence is punishable with imprisonment of above one year and upto three years.

The provisions of the Standards of Weights and Measures Act, 1976 are attracted in case of any false packaging, weight or measure which does not conform to the standards established by or under the said Act and breaches the mandatory declaratory requirements on a package. If any mandatory declaration is found missing on the package a fine of up to 2000 rupees shall be levied as per Rule 39 of the Standards of weights and measures packaged commodity rules.

The Drugs and Cosmetic Act, 1940 also provides for criminal liability for manufacturers and producers of medicinal products or cosmetics etc, which do not adhere to the prescribed standards.

Product Liability Law (Defective Products Law) falls under personal injury/tort law and is closely related to litigation law. It refers to the claims against any parties along the chain of manufacture (designers, manufacturers, distributors and retailers) of products which have defects that harm consumers causing injury or loss. The federal Uniform Commercial Code (UCC) addresses breach of warranty product liability claims, but there are also many laws states have enacted to deal with these claims and common law plays a large part as well.

There are four legal theory categories by which a plaintiff may base his/her damage recovery for a product liability claim:

Breach of Express or Implied Warranty (controlled by contract law) – an express warranty is one that is actually stated, either orally or in writing. This warranty can be

2 (2003) CPJ 90(MRTP)

expressed in the packaging or labeling of the product; on the instructions enclosed with the product; on marketing material for the product and/or in any advertising for the product. When a product’s defect violates information presented in the warranty, the damaged party may be able to pursue a defective product claim. An implied warranty is one that law applies automatically to a product, whether the retailer or manufacturer states it expressly or not. These laws are usually categorized in one of two ways: implied warranty of merchantability, which guarantees that the product is realistically suitable for the purpose for which it is sold and is reasonably safe; or implied warranty of fitness for a particular purpose, which deals more explicitly with a specific function of a product and the buyer’s reliance on the seller’s expertise in offering or suggesting the specific product to fulfill that purpose.

Negligence – the party responsible for the defect failed to exercise ordinary reasonable care and this resulted in the defect which caused harm, injury or some other type of damage. Additionally, there must be duty of care in existence and the plaintiff must be able to exhibit that the alleged responsible party owed him/her this duty. Generally, a manufacturer has a requirement to produce goods free from defective and unreasonably dangerous conditions.

Strict Tort Liability – In general tort law, it is necessary to prove negligence in order to maintain a cause of action; however, with strict liability the plaintiff only need show that the product is defective and that the injury or harm he/she suffered was caused by this defect, and proof of negligence is not necessary.

Intentional Misrepresentation or Fraud – the retailer or manufacturer was aware of a dangerous defect in the product, but concealed this information or marketed the product in a deliberately misleading manner. A defective product is a product that causes harm, injury or some type of loss due to a flaw, error or weakness in the product, its marketing or use. There are three types of defects for Product Liability Claims:

Design Defects – present before the product is made, when the defect is part of the design of the product; it was manufactured properly, but the design itself is faulty.

Manufacturing Error/Defects –when the product does not conform to design specifications or performance standards or it differs in some fundamental way from other units from the same product line. These defects occur during the construction or manufacturing phase and can result from loose, warped or missing parts; sloppy or improper assembly; or the use of substandard or defective materials.

Failure to Warn (also referred to as defective marketing claims) – the manufacturer did not provide adequate warnings, instructions or product labels with respect to a real or potential hazard or danger, which resulted in injury.

THEORIES OF LIABILITY

In most jurisdictions, a plaintiff's cause of action may be based on one or more of four different theories: Negligence, breach of Warranty, Misrepresentation, and strict tort liability.

Negligence refers to the absence of, or failure to exercise, proper or ordinary care. It means that an individual who had a legal obligation either omitted to do what should have been done or did something that should not have been done.

A manufacturer can be held liable for negligence if lack of reasonable care in the production, design, or assembly of the manufacturer's product caused harm. For example, a manufacturing company might be found negligent if its employees did not perform their work properly or if management sanctioned improper procedures and an unsafe product was made.

Breach of warranty refers to the failure of a seller to fulfill the terms of a promise, claim, or representation made concerning the quality or type of the product. The law assumes that a seller gives certain warranties concerning goods that are sold and that he or she must stand behind these assertions.

Misrepresentation in the advertising and sales promotion of a product refers to the process of giving consumers false security about the safety of a particular product, ordinarily by drawing attention away from the hazards of its use. An action lies in the intentional concealment of potential hazards or in negligent misrepresentation. The key to recovery on the basis of misrepresentation is the plaintiff's ability to prove that he relied upon the representations that were made. Misrepresentation can be argued under a theory of breach of express warranty or a theory of strict tort liability.

Strict liability involves extending the responsibility of the vendor or manufacturer to all individuals who might be injured by the product, even in the absence of fault. Injured guests, bystanders, or others with no direct relationship to the product may sue for damages caused by the product. An injured party must prove that the item was defective, the defect proximately caused the injury, and the defect rendered the product unreasonably dangerous.

Historical Development

The history of the law of product liability is largely a history of the erosion of the doctrine of privity, which states that an injured person can sue the negligent person only if he or she was a party to the transaction with the injured person. In other words, a defendant's duty of reasonable care arose only from the contract, and only a party to that contract could sue for its breach. This meant that a negligent manufacturer who sold a product to a retailer, who in turn sold it to the plaintiff, was effectively insulated from liability. The plaintiff was usually without a remedy in tort because it was the manufacturer and not the retailer whose negligence caused the harm.

The privity doctrine dominated nineteenth-century law, yet courts created exceptions to avoid denying an injured plaintiff a remedy. Soon privity of contract was not required where the seller fraudulently concealed the defect or where the products were inherently or imminently dangerous to human life or health, such as poisons or guns. The decisions then began to expand these exceptions. Some courts dropped the Fraud requirement. A concealed defect coupled with some sort of "invitation" by the defendant to use the product was enough. In a few cases, the term imminently dangerous was construed to mean especially dangerous by reason of the defect itself and not necessarily dangerous per se. For example, products intended for human consumption, a defective scaffold, and a coffee urn that exploded would be considered imminently dangerous.

The seminal case of MacPherson v. Buick motor co3., broadened the category of "inherently" or "imminently" dangerous products so as to effectively abolish the privity requirement in negligence cases. It held that lack of privity is not a defense if it is foreseeable that the product, if negligently made, is likely to cause injury to a class of persons that includes the plaintiff. Because this is essentially the test for negligence, the exception swallowed the rule. The MacPherson case quickly became a leading authority, and the privity rule in negligence cases soon was ignored. Increasing public sympathy for victims of industrial negligence also contributed to the demise of the rule.

In warranty, a similar privity limitation was imposed, in part because warranties were thought to be an integral part of the sales contract. Beginning in the early twentieth century, an exception to the privity rule developed for cases involving products intended for human consumption (food, beverages, drugs) and eventually also for products intended for "intimate bodily use" (e.g., cosmetics) so that the warranty in these cases extended to the ultimate consumer. In the case of express warranties, which could be said to be made to the public generally, the privity requirement was abandoned during the 1930s. For example, a manufacturer's statement in literature distributed with an automobile that the windshield was "shatterproof" constituted an express warranty to the purchaser that the windshield would not break (Baxter v. Ford Motor Co., 168 Wash. 456, 12 P.2d 409 [Wash. 1932]).

But with respect to implied warranties, exception to the privity rule did not extend beyond food, drink, and similar products until Henningsen v. Bloomfield Motors, Inc4.. In this case, the New Jersey Supreme Court abolished the privity limitation generally and held that the implied warranties run to the foreseeable ultimate user or consumer of the product. The Henningsen decision, which also invalidated the manufacturer's attempted disclaimer of Implied Warranty liability, has been followed in almost all jurisdictions.

From 1930 to 1960, various legal writers and a few judges discussed the creation of strict liability in tort for defective products. The best-known judicial exposition of this view was

3 217 N.Y. 382, 111 N.E. 1050 (N.Y. 1916)4 32 N.J. 358, 161 A.2d 69 (1960)

California Supreme Court Justice Roger John Traynor's concurring opinion in Escola v. Coca Cola Bottling Co. of Fresno5,. A number of justifications have been advanced for strict liability: negligence is often too difficult to prove; strict liability can be accomplished through a series of actions for breach of warranty; strict liability provides needed safety incentives; the manufacturer is in the best position to either prevent the harm or insure or spread the cost of the risk; and the manufacturer of a product induces consumer reliance on the expectation of the product's safety and should be made to stand behind the product.

Finally, in 1963, in Greenman v. Yuba Power Products, Inc., 59 Cal6., the California Supreme Court adopted strict tort liability for defective products. Within a short time, strict liability swept the country and was, as of 2003, the law in all but a few states.

Negligence

The duty to guard against negligence and supply a safe product applies to everyone in the chain of distribution, including a manufacturer who carelessly makes a defective product, the company that uses the product to assemble something else without discovering an obvious defect, and the vendor who should exercise greater care in offering products for sale. These individuals owe a duty of care to anyone who is likely to be injured by such a product if it is defective, including the initial buyer, that person's family members, any bystanders, and persons who lease the item or hold it for the purchaser.

Additionally, the duty to exercise care involves all phases of getting a product to the consumers or users. The product must be designed in such a way that it is safe for its intended use. It must be inspected and tested at different stages, made from the appropriate materials, and assembled carefully. The product's container or packaging must be adequate. The manufacturer must also furnish adequate warnings and directions for use with the product. The seller is proscribed from misrepresenting the safety or character of the product and must disclose all defects.

Breach of Warranty

Warranties are certain kinds of express or implied representations of fact that the law will enforce against the warrantor. Product liability law is concerned with three types of warranties involving the product's quality or fitness for use: express warranty, implied warranty of merchantability, and implied warranty of fitness for a particular purpose. These and other warranties are codified in the Uniform Commercial Code (UCC), which every state has adopted, at least in part.

5 24 Cal. 2d 453, 150 P.2d 436 (1944)6 2d 57, 377 P.2d 897

An express warranty can be created in one of three ways: through an affirmation of fact made by the vendor of the goods to the purchaser relating to the goods, which becomes part of the bargain; by way of a description of the goods, which is made part of the basis of the bargain; and through a sample or model, which is made part of the basis of the bargain.7

An express warranty can be words spoken during negotiations or written into a sales contract, a sample, an earlier purchase of the same kind of product, or claims made in publicity or on tags attached to the product. An express warranty is created when a salesperson states that the product is guaranteed to be free from defects for one year from the date of the purchase.

Implied warranties are those created and imposed by law, and accompany the transfer of title to goods unless expressly and clearly limited or excluded by the contract. However, with respect to damages for personal injury, the UCC states that any such contractual limitations or exclusions are "prima facie unconscionable" and cannot be enforced.8

The implied warranty of merchantability requires that the product and its container meet certain minimum standards of quality, chiefly that the product be fit for the ordinary purposes for which such goods are sold9. This requirement includes a standard of reasonable safety.

The implied warranty of fitness for a particular purpose imposes a similar requirement in cases in which the seller knows or has reason to know of a particular purpose for which the goods are required and in which the buyer is relying on the seller to select or furnish suitable goods. The seller then warrants that the goods are fit for that particular purpose10. For example, assuming that the buyer tells the seller, a computer supplier, that he needs a high-speed computer to manage inventory and payroll functions for his business. Once the seller recommends a particular computer to handle these requirements, the seller is making an implied warranty of fitness. If the computer cannot adequately process the inventory and payroll, the buyer may file suit.

The action for breach of one of these warranties has aspects of both tort and contract law. Its greatest value to the injured product user lies in the fact that liability for breach is strict. No negligence or other fault need be shown. However, in addition to the privity limitation, certain contract-related defenses have impaired the remedy's usefulness. These include the requirement that the seller receive reasonably prompt notice of the breach as a condition to his or her liability, the requirement that the buyer has relied upon the warranty, and the ability of the seller to limit or disclaim entirely the implied warranties. These defenses are most appropriate in cases in which a product's failure causes economic loss. The trend has been away from strict enforcement of these defenses in personal injury cases in which the action is closer to a tort action.

7 (U.C.C. § 2-313).8 (U.C.C. § 2-719 (3)).9 (U.C.C. § 2-314).10 (U.C.C. § 2-315).

Strict Liability

The rule of strict liability applied in product liability suits makes a seller responsible for all defective items that unreasonably threaten the personal safety of a consumer or the consumer's property. The vendor is liable if he or she regularly engaged in the business of selling such products, which reach the consumer without any substantial changes having been made in their condition. The vendor is liable even if he or she exercised care in handling the product and if the consumer bought the product somewhere else and had no direct dealings with the vendor.

Defects

A critical issue in a product liability lawsuit is whether the product contains a defect, which is an imperfection that renders a product unsafe for its intended use. Design defects exist when a whole class of products is inadequately planned in such a way as to pose unreasonable hazards to consumers. For example, an automobile manufacturer's design of a vehicle with the fuel tank placed in such a position that it will explode upon low-speed impact can be classified as defective. In that case, products manufactured in conformity with the intended design would be defective. A production defect arises when a product is improperly assembled. For example, frames of automobiles that are improperly welded to the body at the assembly plant would be classified as a production defect.

In addition, something other than the product itself can cause it to be defective. For example, caustic chemicals should be packaged in appropriate containers. Improper labeling, instructions, or warnings on a product or its container also make a product defective. Dangerous products should carry warning labels that explain how they should be used, under what circumstances they are likely to cause harm, and what steps can be taken in an emergency involving the product.

The principle of proper labeling includes claims made in sales brochures, product displays, and public advertising. It extends beyond warranty or negligence law, because a seller is strictly liable to users or purchasers of the product who are not in privity with the seller.

A manufacturer who creates the demand for goods through print and broadcast media has the responsibility to determine that the product has the qualities represented to the general public. Some courts allow injured consumers to sue even if they have not read a certain label or advertisement. The standard is that if the advertisement is directed toward the public at large and makes claims that a normal consumer would take into consideration when deciding to make a purchase, then the manufacturer must stand behind that claim for every member of the public.

Causes of Injuries

The issue of causation of injuries can be complicated, particularly if the product involved is only an indirect or remote cause, or one of a number of causes. Regardless of the theory of liability, the plaintiff must prove that the product was defective when it left the hands of the defendant and that the defect was the cause of injury. These issues are ordinarily questions of fact to be decided by the jury.

When the evidence indicates that an injury might have been precipitated by several causes, the question becomes whether the cause for which the defendant is liable was a substantial factor in bringing about the injury. A defendant is not necessarily liable if he is responsible for the last cause or the immediate cause of the injury. For example, a person who was injured by a cooking pot that fell apart when the person removed it from the stove might not have to show that a defect in the pot handle was the only possible explanation for the accident. The jury could still properly consider whether a defect was a concurring cause of the accident, even if they found that the plaintiff misused the pot by handling it too roughly.

Risks

A manufacturer has the duty to make the product as safe as possible. If the manufacturer cannot do so, he has the obligation to adequately warn users and buyers of the dangers that exist. The concept of a reasonably safe product extends to all dangers likely to arise when the product is being used normally or in a way that can be anticipated, even if it is not the purpose for which it was sold. For example, a manufacturer might foresee that someone is likely to stand on a table and might be required either to make it sufficiently strong and stable for people to do so without sustaining injury or to warn customers not to stand on it.

No liability is extended to a manufacturer if a plaintiff was disappointed because he or she had unreasonable hopes for a particular product. Frequently, however, a consumer's expectations are clearly reasonable but are not met. For example, no one expects to find defective brakes in a new automobile.

In some instances, a defect might not be inherent in the product, but a consumer should be aware that care is needed. An average adult need not be warned that knives cut, that dynamite explodes, or that electrical appliances should not be used in the shower. A consumer who ignores hazards will not succeed in an action alleging product liability. However, many manufacturers print warnings about common-sense hazards to provide added protection from a lawsuit.

Traditionally, an individual must be at least as careful as a reasonably careful person. Increasing recognition has been given, however, to a more realistic standard—the occasionally careless

consumer. Courts are now less interested in how obvious a danger is and more concerned with discovering how serious the risk is and how readily it could have been avoided.

A consumer who clearly misuses a product cannot recover if an injury results. For example, a person who disregards a printed warning that nail polish remover is for external use only cannot blame the manufacturer for making an imperfect product if he or she ingests it. In addition, the consumer is precluded from recovery if he or she continues to use a product that is obviously dangerous. The theory is that the consumer has assumed the risk. This rule applies, however, only to obvious defects and does not establish a duty for consumers to scrutinize every product they purchase.

Whether a consumer has assumed responsibility for using an obviously dangerous product or misused a relatively safe product depends on who the user is likely to be. The classic example is children's clothing, which generally must be at least somewhat flame-resistant, because children are less able to appreciate the danger of accidental fires.

Unavoidable Dangers

Although manufacturers and sellers have a duty to take precautions and provide adequate warnings and instructions, the public can still obtain products that are unavoidably unsafe. A seller is not held strictly liable for providing the public with a product that is needed and wanted in spite of the potential risk of danger. Prescription drugs illustrate this principle because all of them have the potential to cause serious harm if used unreasonably.

The duty to warn consumers of unavoidable dangers presents special problems if certain individuals are likely to suffer allergic reactions. The law considers an allergy to be a reaction suffered by a minority of people that is triggered by exposure to some substance. Courts used to reject claims based on allergic reactions, reasoning that the product was reasonably safe and that the injury was caused by a defect peculiar to the individual. That approach has been abandoned, with manufacturers providing careful instructions on use and clear warnings about possible symptoms that suggest an allergic reaction.

Multiparty Litigation

Since the 1970s, groups of plaintiffs have filed consolidated lawsuits against the manufacturers of certain products. The makers of contraceptive devices, silicone breast implants, asbestos, and tobacco products have encountered this type of multiparty litigation. In many states, one judge is appointed to handle all cases involving claims against such a manufacturer. The litigation process can prove costly for defendants because they may have to defend themselves in many

different states. The resulting verdicts or negotiated settlements can also be very expensive to companies.

LEGAL BACKGROUND

It is necessary to have an understanding of the legal aspects having a bearing on product liability insurance. The insured may be a manufacturer, a wholesaler or a retailer and claims for injury or damage may be made against any one or two or all of them by purchase of the goods. Liability for these claims therefore, arises under contract and some of the provision of the Indian Sale of Goods Act is relevant. These are s follows:

Under section 15 of the Sale of Goods Act the seller has a responsibility to ensure that the goods sold corresponded with the description and, if the sale is by sample, that the goods in addition corresponded with sample.

According to section 16, the seller has an obligation to ensure that the goods are fit for which they are required by the buyer and if, the goods are bought by description, that they are merchantable quality. This section modifies the common law maxim of ‘buyer beware’. Again, the provision applies whether the seller is a manufacturer or not.

Section 17 provides that in contracts of sale by sample the goods shall, not only correspond with sample in quality, but shall also be free from defects.

Section 59 confers on the buyer the right among other things, to claim damages for breach of contract.

It is important to note that the actions under Sale of Goods Act for breach of condition or warranty need not be based on negligence. This position applies only as between the parties to the contract. An injured party who is not a party to the contract may, of course, have a claim against the seller but the claim will have to be based on negligence.

A guarantee given by the seller may include not only the replacement of the defective product but also indemnity to the buyer against any loss, damage injury caused by the defective product. This would be liability assumed under contract or agreement which is excluded under the products liability policies.

On the other hand, the seller may contract out of his liability by incorporating a disclaimer. The law does not prohibit such disclaimers as long as :

a) The disclaimer is brought clearly to the notice of the buyer before the sale is effected : and

b) The disclaimer is not contrary to public policy. The buyers too, in certain contracts, may endeavour under the terms of purchase to

transfer to the seller all liability for loss, injury or damage suffered by the buyer. Whether the seller is liable or the buyer is liable will have to be determined with reference to the actual circumstances of the sale.

PRODUCT LIABILITY REFORM

Businesses have sought relief from state legislatures and Congress regarding product liability, contending that the shifting legal standards make them vulnerable to even the most suspect claim. Some states have passed laws that provide manufacturers with the right to defend themselves by showing that their product met generally acceptable safety standards when made. This assertion is known as the state-of-the-art defense, which relieves manufacturers of the task of attempting to make a perfect product. An injured consumer cannot recover on the theory that the product would have been safe had the manufacturer incorporated safety features that were developed after the product was made. Consumer advocates have opposed such laws because they allow manufacturers to avoid liability. The advocates argue that these laws discourage innovation because higher safety standards are set as improvements are made.

Businesses have also attempted to set maximum amounts that persons can recover for Punitive Damages. Some states have capped awards for punitive damages. In 1996, President bill clinton vetoed a bill that would have limited punitive damage awards to $250,000, or two times the economic and non-economic damages, whichever amount was greater, stating that it would deprive U.S. families of the ability to fully recover for injuries caused by defective products.

In the same year, the Supreme Court imposed its own version of product liability reform with BMW v. Gore11,. The case involved an automobile purchaser who brought action against a foreign automobile manufacturer, American distributor, and dealer based on the distributor's failure to disclose that the automobile had been repainted after being damaged prior to delivery. An Alabama circuit court entered a judgment in the case of Compensatory Damages of $4,000 and punitive damages of $2,000,000. The Supreme Court ruled unanimously the punitive damages award was excessive. In this case, the Court devised three factors to assist trial judges in determining whether a jury's punitive damages award were excessive: (1) the degree of reprehensibility of the defendant's conduct; (2) the disparity between the harm or potential harm suffered by the plaintiff and the punitive damages award; and (3) the difference between the punitive damages award and the civil or criminal penalties authorized or imposed in comparable cases. The BMW case showed that there were limits under the Constitution to the amount of punitive damages that could be imposed.

Federal Preemption of State Product Liability Law

For the most part, product liability law is governed by state law. Occasionally, the federal government will move to preempt an entire area of product liability law from state control in order to protect a certain group of manufacturers. An example of this is the Federal Biomaterials

11 517 U.S. 559, 116 S. Ct. 1589, 134 L. Ed. 2d 809 (1996)

Access Assurance Act, a 1998 law that protects suppliers of materials for implantable medical devices from "unwarranted" suits by laying out the permissible basis of biomaterials supplier liability. Under the act, a biomaterials supplier may only be held liable in three situations:

1. when the supplier is a manufacturer of medical implants under the act;2. when the supplier is a seller of medical implants; or 3. when the supplier sold materials that did not meet contractual specifications of the

manufacturer.

More problematically, a court will have to decide whether an area of product liability is affected by a federal law that does not expressly preempt product liability suits but may indicate the federal government wished such suits to be preempted. For implied Preemption, the Supreme Court has recognized two subcategories: field pre-emption and conflict pre-emption. Under field pre-emption, a state statute is superseded when a federal statute wholly occupies a particular field and takes away state power to supplement it. Conflict pre-emption occurs when compliance with both the federal and state statute is impossible, and the state law stands as an obstacle to the legislative objectives of Congress.

An example of conflict preemption was Geier v. American Honda Motor, Inc12., in which the Court ruled against an injured motorist who brought a defective design action against the automobile manufacturer under District of Columbia tort law, contending that the manufacturer was negligent in failing to equip the automobile with a driver's side airbag. The Court ruled the law suit was preempted in that it actually conflicted with department of transportation (DOT) standard, promulgated under National Traffic and Motor Vehicle Safety Act, requiring manufacturers to place driver's side airbags in some but not all 1987 automobiles. The Court noted the rule of state law imposing duty to install airbag would have presented an obstacle to variety and mix of safety devices and gradual passive restraint phase-in sought by the DOT standard.

12 529 U.S. 861, 120 S. Ct. 1913, 146 L. Ed. 2d 914, (2000)

PRODUCT LIABILITY INSURANCE

In product liability insurance terms, a product is any physical item that is sold or given away

Products must be 'fit for purpose'. An individual is legally responsible for any damage or injury that a product you supply may cause.

Responsibilities

If the seller supplies a faulty product, claimants may try to claim from him first, even if he did not manufacture it. He will be liable for compensation claims if:

business' name is on the product business had repaired, refurbished or changed it imported it from outside the European Union cannot clearly identify the manufacturer the manufacturer has gone out of business

Otherwise, the manufacturer is liable - or the processor, where the product involves parts from multiple manufacturers.

However, one must also:

show that the products were faulty when they were supplied to the seller. show that the seller gave consumers adequate safety instructions and warnings about

misuse show that the seller included terms for return of faulty goods to the manufacturer or

processor in any sales contract he gave to the consumer make sure that the seller supply contract with the manufacturer or processor covers

product safety, quality control and product returns have good quality control and record-keeping systems

What is covered?

Product liability insurance covers the individual against damages awarded as a result of damage to property or personal injury caused by your product. Product liability insurance also covers the individual against unforeseen circumstances, such as product faults the quality control system

couldn't trace. However, if one simply makes an inferior product, he may be unable to make a claim, or even get insurance. Bad workmanship is not covered.

Before issuing a policy the insurer will want to know that:

manufacturing or services are carried out in line with industry best practice staff are adequately trained equipment and systems are appropriate, up to date and well maintained