Anyone in the chain of production or distribution faces risk of litigation, so knowledge and preparation are key

April 1, 2012
TRUCK equipment manufacturers and distributors can never eliminate the risk of litigation. The best they can do is anticipate, plan for, and minimize

TRUCK equipment manufacturers and distributors can never eliminate the risk of litigation. The best they can do is anticipate, plan for, and minimize the risks that are always going to be there.

Work trucks raise “unique litigation regulatory risks,” according to Theodore Dorenkamp III of Bowman and Brooke LLP.

“As with any consumer product involved in an injurious accident, injured plaintiffs, operators, or injured third parties typically sue, alleging product liability, negligence, and various subsets,” Dorenkamp said. “The premise is similar under all these theories — the failure of a product.”

There are two separate areas of law:

• American Product Liability Law: litigation risk. This involves the individual unit of product, private parties (no government), common law/community standards, and cost-shifting responsibility (public-private).

• Regulatory risk. This involves the entire line of product, government (state or federal), civil penalties, and a recall.

Who can be liable? Manufacturer? Distributor? Dealer? Importer? Supplier?

“The key phrase is, anyone in the chain of production or distribution,” he said.

“Many states law insulate those who did not exercise significant control over the design of the product or its labels, didn’t create the defect, or have knowledge of that defect. Plaintiffs prefer filing lawsuits in state court and will sue the local dealer or distributor in an effort to prevent the manufacturer from removing the case in federal court. Manufacturers prefer federal court, which tends to be more predictable. Recently plaintiffs have been arguing that dealers should be charged with knowledge of defects based on recalls issued on the same or similar vehicle.

Dealing with the issues

Theories of liability:

Negligence. This focuses on the conduct of the defendant—the failure of a defendant to exercise reasonable care in the design, manufacture, testing, servicing, instruction, or warnings related to its product.

“Each state may have slightly different standards, but the jury usually is instructed to analyze the product in terms of risk versus utility,” he said. “Did the manufacturer or other defendant act reasonably in the face of a known risk? Were other, safer alternative designs available? What was ‘state of the art’? Did the manufacturer comply with statutory or industry standards? All of those issues are relevant.”

Strict liability. This focuses on the product itself when it left the hands of the manufacturer. Negligence or innocence of the manufacturer is irrelevant.

“Was the product ‘defective’ when it was sold?” he said. “The definition of ‘defective’ depends on the jurisdiction and on the nature of allegation and ‘theory of liability’—whether it was a manufacturing defect, design defect, or inadequate warning or instruction.

“A manufacturing defect is when a specific unit of the product departs from its intended design. A design defect applies to the whole line of product and is when the foreseeable risks of harm posed by the product could have been reduced or avoided by the adoption of a reasonable alternative design and the omission of the alterative design renders the product not reasonably safe.

“An inadequate warning or instructions applies to the whole product line with a particular instruction/warning and when the foreseeable risks of harm posed by the product could have been reduced or avoided by the provision of reasonable instructions or warnings and the omission renders the product not reasonably safe.

“Manufacturing-defect claims usually don’t stick in standard product liability and defect lawsuits because there are thousands or millions of vehicles that come off the line, and it is possible but not frequent that one or a few of them would have a manufacturing defect. Rarely do we see a welding-defect claim. We’re more likely to see a design defect.”


• There was no defect. It complies with applicable government regulations and with industry standards, and is state of the art.

• Alleged defect did not cause injury.

• Operator failed to read and heed warnings/labeling/instructions.

• Component part supplier/government contractor.

• Negligence: product misuse, contributory negligence (injured party’s negligence contributed to his own injury).

• Strict liability: alteration of product or product misuse.

There are different kinds of damages: compensatory damages that are meant to “compensate” a person for injuries caused by a defective product; past damages/future damages; economic damages for lost wages and medical expenses; and non-economic damages for pain and suffering, disfigurement, and humiliation.

“Some states are placing a ‘cap’—a maximum award for non-economical damages,” he said.

He said punitive damages reflect deliberate disregard for safety or health of others.

“They have the potential to significantly increase product-liability exposure,” he said. “Juries may award money to plaintiffs to punish a defendant in certain jurisdictions. It’s meant to send a message to defendants who disregarded a known risk. Juries may award an excessive amount.”

The good and the bad

The good news:

• Tort reform, with many states placing limits on strict liability claims, non-economic damages, and when suits can be filed.

• There are fewer new product liability lawsuits filed every year, and manufacturers and sellers win outright a great majority of cases.

• The US Supreme Court has stated that, in most cases, the judge must reduce the punitive damages to a reasonable factor of the compensatory damages, which could be 10 times the compensatory damages.

The bad news:

• Plaintiff’s attorneys are experienced, organized, coordinated, and sharing information.

• Special interest groups are strengthening, such as the American Association for Justice (formerly the Association of Trial Lawyers of America).

Dorenkamp said accidents are inevitable, which is why an

Accident Response Plan is so critical. The goals are to: get more information; preserve all evidence; avoid creating “bad” evidence, such as recording a statement from a distraught operator who may be nervous and frightened, and may not know all the facts; control the scene and the evidence, and ultimately the story, thereby reducing and/or eliminating unnecessary risks.

He recommends assembling a team consisting of an agent/adjuster, safety/compliance officer, accident reconstructionist, and lawyer.

At the accident scene, document evidence and take complete photographs, take statements from witnesses, and cooperate with police or other regulatory bodies.

But do not volunteer information (especially to the media), talk to an injured party, or try to explain what happened.

He recommends collecting and preserving all relevant documents, contacting all records custodians, and putting a litigation hold on relevant documents. But do not send a flurry of emails about the accident without including your attorney or destroy anything.

He said warranties and disclaimers are the cheapest and easiest way to protect yourself.

“A well-written warranty for an incomplete vehicle can protect from liability from some failure of the finished product,” he said. “A warranty can protect the manufacturer when a finished product is modified after it leaves the manufacturer. But these are more of a function of product-liability law than a warranty. Warranties generally do not apply in personal-injury cases. Rules vary by state.”

There are two types of warranties: express warranties, which should be written and not oral; and implied warranties, which deal with merchantability and fitness for a particular purpose.

“Merchantability means that a product is what it is represented to be and will perform as it is ordinarily and customarily used,” he said. “Plaintiffs can establish a break of the warranty by proving a product contained a blatant or inherent defect.

“Fitness for a particular purpose is a specific use of a product that is peculiar to the nature of the business, so a party asserting breach of warranty must show that the seller had reason to know at the time of sale that the buyer had a particular use in mind, and the buyer is relying on the seller’s expertise to select a product. This becomes a little more important on work-truck cases.

“For example, a chassis cab manufacturer will produce and distribute an incomplete vehicle to someone who might turn the vehicle into something else. Plaintiffs often argue that liability should accrue to the manufacturer because they could expect the altered product. However, unless the manufacturer knows who the alterer of the product is going to be, they’re not likely going to be found in breach of implied warranty of fitness for a particular purpose. The purchase agreement between the manufacturer and upfitter should cover those aspects of shared responsibility.”

There are several areas of law that apply to warranties; Uniform Commercial Code, or “UCC”; common law; Magnuson-Moss Warranty Act (consumer products); and state lemon/consumer protection laws (consumer products).

What can be disclaimed: Certain express warranties, implied warranties, and types of damages.

An express warranty is any affirmation of fact or promise to the buyer, or description of the good, oral or written. It can be negated or limited only if such disclaimers are not unreasonable.

“State what is warranted and what is not,” he said. “Do not warrant more than you must. Fight the temptation to offer an unlimited warranty. Consider that express warranty disclaimers may vary depending on whether the product is new, used, or refurbished.

“Disclaim everything you can. The UCC allows sellers to disclaim the implied warranty of merchantability, provided the disclaimer is made conspicuously and the disclaimer explicitly users the term ‘merchantability’ in the disclaimer. Most disclaimers must be conspicuous in the contract—in a different kind of print or font that makes it stand out.

“Use the magic language. In some jurisdictions, an implied warranty in a sales contract can be expressly disclaimed by the use of specific language: ‘as is’ or ‘with all faults.’ ”

What can’ be disclaimed:

• Negligence and gross negligence. “For example, if a defective product causes a personal injury, a contractual provision limiting recovery in such a case will be deemed unconscionable.”

• Some jurisdictions limit the ability of sellers or manufacturers to disclaim the implied warranty of merchantability for fitness, such as Massachusetts.