A Look at Product Liability Risks for Retailers by Eric Rice, attorney-at-law
In the day-to-day grind of retail it’s natural to want to focus mostly on the “fun stuff”… buying or making product, stocking the shelves, selling to customers, and counting the cash in the drawer, right? At the same time, it would be irresponsible to simply ignore the underlying risks inherent to running any business; risks that could easily take a company down, in short order.
One of those underlying risks is an ugly little thing called “Product Liability”. It’s something nobody likes to think about but nevertheless, it can force its way into your daily vocabulary with just one consumer “claim” of harm done, alleging that your shop is to blame for selling a bad product.
If you’re strictly a re-seller, your initial inclination might be to assume that since you did not manufacture the product or deliberately sell something dangerous you should therefore not be held accountable … which any good attorney will simply counter with, “a retailer has a responsibility to ensure the products he/she is selling are safe”… and then your lengthy legal battle begins. That’s how litigation works. Lawyers cast a wide net initially and then determine who is culpable and who is not, after the fact.
The Liability Pie
Imagine business-to-consumer liability as a whole pie, made up of “slices” which represent all of the different companies and entities that are involved with getting a product from “concept” to a finished product, which is ultimately delivered into the customer’s hands.
With that in mind, let’s look at a hypothetical example involving a bottle of aspirin you decide to purchase from a vendor to sell in your shop. Your customer gets injured from the ink on the label, which contains lead. Who is to blame? How is the liability pie divided? Like everything associated with litigation, the answer is “It depends.”.
For starters, you’ll need to be able to prove that you had no prior knowledge of, or concerns about anything or anyone involved in the process, which had the potential to cause an incident. For example, if any supplier was providing outdated ingredients or materials to the manufacturer who produces the finished bottle of aspirin, it could have a drastic effect on the safety of the product. Is everyone in the supply chain using reputable vendors? … And so goes the “discovery process”.
Of course, you will also have to prove that you had no role in affecting or altering the product after receiving it in your shop and before selling it to the consumer.
To make matters worse the problem can multiply very quickly because more than likely you sold that same product to multiple customers. What if they all get injured?
You can see why it’s so important – and in your best interest – to take all possible precautions, in an effort to make your slice of the pie as small as possible so that if an issue of liability does arise, you are less likely to be held responsible for someone else’s error.
So how do you, as a retailer, protect yourself and mitigate liability?
- First and foremost, commit to working only with reputable vendors and manufacturers that sell high quality products. This is especially important in today’s strict regulatory environment. Verify that your suppliers are compliant with regulations and that they are able to identify and source all ingredients used in their products. Make sure they have provided you with all of the necessary documentation you will to need have on file if inspectors or authorities happen to pay you a visit.
- Next, take some time to investigate your vendors, checking to see if you can find any consumer complaints. You might try (for instance), The Better Business Bureau, keyword google searches for news stories, online reviews, social media accounts, industry forums, etc.
- Educate yourself on all of the state and local requirements that may apply to your business, such as disposal of hazardous waste, retail rules for your industry, etc. These all vary – city by city and county by county – all over the country.
- Many general business insurance policies have exclusions for product liability. CYB (cover your bases) and get the product liability insurance or buy from vendors who have it and will list you as an additional insured.
- Making sure your stock is never out of date and that product packaging is intact at the point of sale are two more mitigating factors. Having a clean store at all times, is another.
All of these things can help reduce your piece of the liability pie and will assist in limiting your exposure to a consumer lawsuit. If an issue does arise, a retailer may be able to avoid liability by claiming that it did its due diligence and worked with a reputable manufacturer.
Of course, if you are creating/mixing/pouring your own product (not just reselling) you are taking on MOST of the liability pie yourself because in that case you are the manufacturer and are therefore responsible for the regulatory compliance pieces, including (now) all of the paperwork and FDA filings that go along with that, per the new Deeming rules.
In other words, if you the retailer were solely responsible for the production and sale of the product that caused injury, you alone would be held liable for the damages caused by the use of your product or service. The only entities left to possibly share the blame (“the pie”) with is your suppliers who provided the components of your product – and even then, a court will argue that you had a responsibility to ensure that your suppliers are reputable and trustworthy.
This information is provided for general information only. It is not legal advice. Always consult a lawyer before taking any actions regarding the subject of this article. Do not take any actions in reliance upon the information presented. The topics discussed vary from jurisdiction to jurisdiction and the information presented may not be applicable to entities. No attorney-client relationship is formed by the giving of this information.