Evaluating a product liability program is critical for any business that manufactures products for sale to both businesses and individuals. If the products are consumer goods or play a critical role in another product, the liability program, quality control and product documentation should be considered fundamental to the business. The potential risks associated with defective products can lead to significant financial losses, legal repercussions and damage to a company’s reputation. This article explores the essential components and best practices for assessing and strengthening your product liability program to mitigate risks and enhance overall safety.

Understanding Product Liability

Products liability refers to the legal responsibility of manufacturers, distributors, suppliers and retailers for any injuries or damages caused by defective products. Although nearly any aspect of a product can lead to liability claims, there are three main categories:

Design Defect: Occurs when a product is inherently unsafe due to its design, even if it is manufactured perfectly according to specifications. This type of defect suggests that the product could have been designed more safely, and its inherent risks outweigh its benefits.

Manufacturing Defect: Arises when a product deviates from its intended design during production, making it dangerous or unusable. This could happen due to errors in the assembly process, use of substandard materials, or other issues that occur while the product is being made.

Duty to Warn and Instruct: Involves the obligation of manufacturers and sellers to provide adequate instructions and warnings about the potential risks associated with using a product.

For example, if a product has dangers that are not obvious to the consumer, the company must inform users of these risks to avoid liability for injuries caused by the product.

A product liability program is designed to prevent defects from reaching the consumer, manage risks associated with product use and minimize the financial impact of any claims that arise. Evaluating a program not only addresses the issues identified with the three categories listed above but also monitors changes in the legal environment, new standards that supersede existing ones, and different state by state rules, or even standards in other countries.

“It’s not just about the product itself—it’s about the processes, documentation and communication behind it,” says Eric Austin, Risk Management Expertise Specialist at 91șÚÁÏÍű. “A solid liability program is like a safety net. Without it, a slight oversight can have significant financial and reputational consequences.”

Methods of Evaluating Product Liability Programs

To evaluate the effectiveness of a product liability program, organizations should focus on several key metrics that provide insight into the program’s performance. These metrics can be broadly categorized into preventive, reactive, and financial metrics.

Preventive Metrics: Focus on measures to prevent defects and ensure product safety before products reach the market. These include:

• Complaints and Warranty Issues: Prior to a product failure, a company may receive complaints about the performance of a product or part, or there may be warranty issues. Although a company may not like paying out warranty claims or listening to complaints, addressing issues during this phase reduces the likelihood of future liability claims.
• Compliance Rate with Safety Standards: Regular legal review of product instructions and warning statements is crucial. What was considered “best in class” 10 years ago may not be today. Researching recalls, lawsuits, or other issues with similar products can help identify necessary changes.
• Quality Control Audit Scores: Regular audits of quality control processes reveal how effectively a company is identifying and addressing potential product defects before they lead to liability issues. Many industries have specific standards such as ISO, IATF, HACCP, and others. Understanding applicable standards enables a better evaluation of a program and the audit methods in place.

Reactive Metrics: Assess how well the products liability program responds when an issue arises, including how efficiently it manages claims and resolves incidents.

Post-Incident Review: After resolving a product liability issue, conducting a thorough review to identify lessons learned, improve processes, and enhance the overall effectiveness of the program. If complaints or warranty issues were noted prior to the failure, it’s essential to determine why changes were not made and whether complaint or warranty personnel communicated the issues to design or manufacturing.

Product Recall Procedures: Well-defined protocols for recalling defective products quickly and efficiently are crucial, including communication strategies with consumers, retailers and regulatory bodies. Questions about product traceability and purchaser identification are pertinent.

Crisis Communication: Plans for communicating with stakeholders, the public and media during a product liability crisis aim to maintain transparency, trust, and minimize reputational damage.

Corrective Action: Processes for implementing corrective measures to address the root cause of the defect or incident, preventing future occurrences, and updating safety standards and procedures accordingly.

“The most successful organizations treat metrics as an early-warning system,” Austin contends. “Warranty data, customer complaints, even removed safety labels—all of these are signals. If you capture and act on them quickly, you can help prevent much bigger problems down the road.”

Tools for Evaluating Product Liability Programs

Evaluating a product liability program involves checking the level of detail of the program itself and verifying that internal controls cover a wide range of topics, well beyond the categories of design and manufacturing defect, plus duty to warn. Internally, company tools can include:

Gap Analysis: Comparison of the current liability program to industry best practices, legal standards, and new precedents in liability cases with similar products.

• For instance, the standard for warning labels and statements was updated in 2022 and 2023. While not legally binding, this updated standard could be a factor in a liability case focusing on ‘duty to warn.’

Legal Reviews and Case Studies: Assessing changes in the legal environment, which vary by state and country. Adopting the most stringent standards, such as California’s, could cover most other jurisdictions.

Customer Feedback and Warranty Data: Early indicators of potential issues that could turn into claims. Involvement of the Service Department is crucial as they can report not just product failures but also removed guards, labels, or other safety devices.

Simulations: Testing the traceability of products in the event of a recall and identifying key contacts and relevant government agencies. Simulations are vital tools in evaluating the effectiveness of a program.

Employee Products Liability Training: Ensuring that warranty and service departments communicate issues to design and manufacturing is crucial. Employee training and basic knowledge on products liability are valuable tools to prevent major failures.

Continuous Improvement and Adaptation

Evaluating the effectiveness of a products liability program is not a one-time task; it requires continuous monitoring and adaptation. As new products are developed and market conditions change, the risks associated with product liability evolve. Regularly reviewing the metrics and tools mentioned above allows companies to adapt their programs to these changes, ensuring ongoing effectiveness. Checking for revision dates on instructions or warranties can indicate whether a company regularly updates their programs and has a review program in place.

Looking Ahead

By focusing on a company’s preventive and reactive programs, plus verifying a ‘whole company’ approach toward products liability, a company can ensure that their products liability program is effective in not only minimizing risk to the buyer/consumer but also protecting the company’s financial interests and even survivability. Continuous evaluation and updates to a products liability program are crucial to ensuring the company stays ahead of potential risks and maintains a strong defense against liability claims. Learn more at .

The materials and information found here are informational resources and do not and should not be construed as direct processional, legal or other advice as to specific facts and circumstances.  It is recommended you always seek appropriate professional advice as to your particular circumstances.  91șÚÁÏÍű disclaims any and all liability for actions taken by you based on the content of these resources.

But here’s where it gets interesting: in several cases, companies that don’t actually manufacture a product can still be considered “manufacturers of record” and be held liable for product liability claims.

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“Product liability isn’t just about who made it—it’s about who touched it, sold it, shipped it, or put their name on it,” says Eric Austin, 91șÚÁÏÍű Risk Management Expertise Specialist.

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Curious? Let’s break it down with some real-world scenarios.

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Private Labelling and Branding

Scenario: Picture this: a retail chain partners with a third-party manufacturer to produce goods under its store brand. You’ve probably bought these items—think generic cereals or store-brand electronics.

Manufacturer of Record: Even though the retailer didn’t physically produce the goods,Ìęonce they apply their brand to the product and sell it, they’re considered the manufacturer of record. That means they could be responsible for any defects, safety issues, or liabilities tied to the product.

Example: Perhaps a store-brand toaster causes a house fire due to a manufacturing defect. If the store sold the toaster under their label, they could be considered the manufacturer of record, even though a separate factory made the product.

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Assembled Products

Scenario: Some companies assemble finished products using parts sourced from various manufacturers, branding the final product as their own.

Manufacturer of Record: Even if the company didn’t create the individual components, may place them in the manufacturer’s role. They could be liable for any defects introduced during assembly or related to the final product’s performance.

Example: Think about a laptop company that builds computers using processors, hard drives, and screens sourced from other suppliers. If a short circuit caused by faulty wiring damages the laptop, the assembler—not the component makers—could likely face the liability.

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Companies That Customize or Modify Products

Scenario: A company buys standard products but adds before selling them to customers.

Manufacturer of Record: Once a product is altered, the company responsible for the changes typically assumes liability for any issues resulting from those modifications—even if the original product met all safety requirements.

Example: Picture a seller of industrial equipment adding custom electrical panels to machines. If the modifications lead to a fire or malfunction, the modifying company could be held liable as the manufacturer of record.

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How Can a Company Protect Itself?

Becoming a de facto manufacturer doesn’t have to mean taking on massive risks. Implementing strong protections and best practices, as well as understanding how to protect your business from liability, is essential—not just for legal reasons, but to help build consumer trust and brand resilience. Let’s dive into some practical strategies:

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For Private Labeling and Branding

When you sell a product under your own brand name—even if it’s manufactured by someone else—you could be on the hook for its safety. That’s why detailed contracts with third-party manufacturers are important, including indemnification clauses can help protect you from certain losses, damages or liabilities that may arise from product defects. Also, require product liability insurance that names your company as an additional insured.

Beyond contracts, demand evidence of compliance with safety standards. Be sure to conduct routine quality control inspections and implement a recall response plan to address defects before they escalate into possible lawsuits.

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For Assembled Products

If your product is the sum of many sourced components, liability could still fall on you. That’s why it is recommended you include indemnity clauses in supplier contracts and ensure all component suppliers carry adequate liability insurance, with your company listed as an additional insured.

At the operational level, conduct rigorous quality checks at every stage of the assembly process. Comprehensive liability insurance should cover the entire assembled product to protect against defects that arise during integration. Learn more about at the National Institute of Standards and Technology (NIST).

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For Companies That Customize or Modify Products

Customizing or modifying existing products—whether through design tweaks or functional upgrades—could transfer safety responsibility to you. Protect your business by clearly outlining liability in contracts and using disclaimers for unaltered components.

Crucially, test all modifications thoroughly and certify safety compliance with help from professional engineers when necessary. The Occupational Safety and Health Administration (OSHA) offers on modifying machinery and equipment safely.

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Best Practices for All Businesses

Regardless of your business model, some liability protections are universal:

• Robust Product Liability Insurance: This is your financial safety net for claims involving defects, injuries, or recalls.
• Supplier Audits: Regularly verify that your suppliers meet safety and quality benchmarks.
• Consumer Feedback Channels: Establish systems for customers to report issues and act swiftly on complaints.
• Traceability Systems: Maintain detailed records of sourcing, testing, and manufacturing to streamline recalls and defend against legal claims.
• Legal Counsel: Partner with professionals to draft airtight contracts and stay up to date with evolving regulations.

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Looking Ahead

Navigating the complexities of product liability doesn’t have to be overwhelming. Understanding when your company might be considered a manufacturer, combined with proactive safeguards, can help reduce risk and protect your business. Whether you’re private labeling, assembling, or modifying products, preparation is key to staying ahead of potential challenges.

Prioritize quality control, strengthen your contractual protections, and ensure compliance at every stage of the process. With these steps in place, you can confidently manage liability risks while maintaining trust with your customers. For more expert advice, actionable resources, and tools to safeguard your business, visit our Risk Management page.

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The information provided in this article is for general informational purposes only and does not constitute legal advice. We recommend consulting with an attorney to ensure compliance with all applicable laws and to receive legal advice tailored to your specific circumstances.

When an organization produces goods, the hope is that the products are fault-free. However, there may be instances when a product could become dangerous to the public, and it’s the company’s responsibility to inform consumers about these risks.

This responsibility is referred to as the “duty to warn.” The duty to warn doctrine is based on the idea that consumers should be able to make informed decisions about whether to use a product. If a product is dangerous, the manufacturer has a duty to warn consumers about those dangers so they can make an informed decision about product usage. 

What Is Included in Duty to Warn?

Manufacturers in particular must remember that the duty to warn includes products that are safe, designed and manufactured well, but normal function can still cause injuries. An obvious example is a chainsaw, but we also see warnings appearing on plastic bags, buckets, or other seemingly innocuous items that may present a hazard to children.

Duty to warn covers reasonably foreseeable use and misuse. Inhaling aerosol propellants, for instance, could be considered reasonably foreseeable misuse. 

The Leading product liability allegations include failure to warn, failure to instruct, and inadequate warnings. Failure to instruct means that the operations for a product were not adequate for safe use, or, ignored foreseeable misuse. Instructions should include warnings about removal of guards, or those who should not use a particular product. Children, for example, should not use power tools or different types of cooking appliances.

An inadequate warning may not be clear to the user or may not sufficiently warn the user of what the hazard is. 

Principle of Negligence

A businesses’ duty to warn is based on the legal principle of negligence, or a failure to use reasonable care that results in harm to another person.

What is considered negligence? To establish negligence, a plaintiff must prove four elements:

1. The defendant owed the plaintiff a duty of care.
2. The defendant breached that duty by failing to use reasonable care.
3. The plaintiff suffered harm as a result of the defendant’s breach.
4. The harm was caused by the defendant’s breach.

Fulfilling Duty to Warn

In the context of product liability, the duty to warn arises when a product is considered unreasonably dangerous, meaning it is more dangerous than a reasonably prudent person would expect it to be.

There are two main ways a business can fulfill its duty to warn:

1. By providing adequate warnings on the product itself.
2. By providing adequate warnings in other ways, such as through product literature or safety instructions.

These warnings must be clear, conspicuous, and adequate enough to inform consumers about the dangers associated with the product, or misuse of the product.

Warning Standards & Guidance

ANSI Z535.4-2022 is a on the design and content of safety warnings. The standard is not legally binding, but it is widely used by businesses to comply with their duty to warn. The standard is a valuable resource for businesses that want to ensure their warnings comply with their duty to warn. It covers a wide range of topics for warning labels, including purpose, type, content, format, placement, and testing.

How Standards Apply to Products Liability Lawsuits

While ANSI Z535.4-2022 is not a legal document, it is often used as evidence in product liability lawsuits. If a plaintiff is injured by a product, it may be argued that the manufacturer failed to provide adequate warnings about the dangers of the product. If the manufacturer followed ANSI Z535.4-2022 in designing and developing the warnings, this may help defend the manufacturer against the lawsuit.

Overall, ANSI Z535.4-2022 is a valuable resource for businesses wishing to comply with the duty to warn. However, it is important to note that the standard is not a guarantee of safety. The standard is only a guideline, and there may be cases where a manufacturer can comply with the standard and still be found liable for a product liability lawsuit.

Where to Start

During the design phase of a product, a manufacturer should understand the intended use, target audience or those that may use the product, and potential hazards of a product. Those in engineering, design, manufacturing, legal, and risk management should be tasked with assembling all of the relevant data on a product. 

Step two would be identifying all possible ways a product can be used/misused. Looking at similar products in the marketplace can be of assistance, plus any lawsuits or even simple complaints on existing similar products. An evaluation of these factors should be made, with warnings being made to not only comply with the standards listed above, but also from what was learned in the design phase analysis.

Finally, once a product is in the marketplace, warnings should be adjusted according to complaints on instructions, product failures, or known examples of misuse. If a new label is determined to be necessary to comply with the standards on subsequent products, then it may be necessary to send an alert out to those who have already purchased the product with the new label or instruction update, along with proper placement (if it is a label being sent). A business must prove that they did everything a responsible business could do to protect the consumer and public. 

Learn More                     

Learn more about product liability and ANSI standards:

• Product Liability and the Big Picture
• Building a Cross-Functional Products Liability Program

And stay tuned for the next article in this series: Products Liability & Social Media

About the Author

In his current role at 91șÚÁÏÍű, Eric assists with the review of manufacturing accounts, the products produced, and coordinates with underwriting teams on potential issues identified, while helping to coach risk management consultants prior to visiting prospective accounts. Eric has been a featured speaker for the National Pool Builder’s Association meeting, providing safety instruction to company ownership personnel. Additionally, he created the widely successful . Eric was named 91șÚÁÏÍű’s Loss Control Consultant of the Year in 2012, and has been nominated for this honor two other times. He has been published in Safety and Health Magazine, as well SafetyInfo.com’s online magazine. 

The information provided in this article does not, and is not intended to, constitute legal advice; instead, all information, content, and materials contained in this article are for general informational purposes only. 

In nearly every industry and sector, there is potential for error and unforeseen circumstances. It is critical for businesses that are involved in the selling and distributing of products to implement and maintain a product liability program to reduce their company’s overall risk.

A product liability program is a set of policies and procedures a business puts in place to reduce the risk of product-related injuries and lawsuits. The program should be designed to identify and control hazards, train employees on safe product use, and respond to product-related incidents.

How to Create a Product Liability Program

To create a product liability program, a business should first assess its risk. This involves identifying the types of products it makes or sells, the potential hazards associated with those products, and the likelihood of those hazards causing injuries. The business should also consider the potential costs of product liability claims, including medical expenses, lost wages and legal fees.

Once the business has assessed its risk, it can develop a product liability program to address those risks. The program should include the following elements:

• Hazard identification and control: The business should identify and control any hazards associated with its products. This may involve redesigning products, adding warnings or instructions, or providing training to employees and customers.
• Employee training: The business should train its employees on safe product use. This training should cover the potential hazards associated with the products, as well as the proper procedures for using and maintaining them.
• Incident response: The business should have a plan in place to respond to product-related incidents. A plan should encompass procedures for reporting incidents, investigation, and corrective action.

Product Liability Across Functions

When building a product liability program, the business should also include multiple business functions. This should always include the following departments:

• Engineering: The engineering department should be responsible for identifying and controlling hazards associated with products.
• Manufacturing: The manufacturing department should be responsible for implementing the hazard controls identified by the engineering department. Note, this function may also encompass quality control, if assigned to the manufacturing department.
• Quality Control: The quality control department should be responsible for ensuring that products meet safety standards.
• Sales and Marketing: The sales and marketing department should be responsible for providing customers with accurate information about the risks associated with products.
• Customer Service: The customer service department should be responsible for responding to customer inquiries about product safety.

By including multiple business functions in its product liability program, a business can help to reduce the risk of product-related injuries and lawsuits.

Keys to Program Success

Once the product liability program has launched, there are important steps to take to ensure it continues to run effectively and efficiently. Consider these tips for creating and maintaining a successful product liability program:

• Ensure the program continues to be tailored to the specific risks of your business.
• Obtain input from all relevant departments when developing and reviewing the program.
• Train employees on the program and ensure that they understand their responsibilities.
• Review the program regularly and make changes as needed.
• Keep records of all product-related incidents and take steps to prevent future incidents.

By following these critical steps, businesses can help to protect themselves and their employees from the possible financial and reputational costs of product liability claims.

The information provided in this article does not, and is not intended to, constitute legal advice; instead, all information, content, and materials contained in this article are for general informational purposes only.ÌęFurther, this information may not constitute the most up-to-date legal or other information.

When most people think of products liability, their first thought is around whether a product is safe to use. When creating a product, manufacturers typically focus on design standards, product testing, and the risks associated with packaging, such as instructions and warning labels. These elements are crucial to the safe use of a product, as well as to a company’s bottom line in the event of a liability lawsuit. These focus areas, however, can also leave out opportunities to further improve a product’s safety and reduce the impact of a potential lawsuit.

“When looking at products liability, it is vital to factor in all aspects of the manufacturing process, from the conceptual phase to design and manufacturing to quality assurance, marketing, warranty, and service through end-of-product life. At each phase of the process, there are critical decisions and responses that should be addressed,” said Eric Austin, 91șÚÁÏÍű Risk Management Expertise Specialist.

Product Safety in the Conceptual Phase

There are several historical examples of the need for product safety early in the product development process. The Gilbert U-238 Atomic Energy Laboratory was released in 1950, allowing children to use radioactive material to learn about nuclear and chemical reactions. In addition to a cloud chamber and a wire of Polonium 210, the kit also contained four glass jars containing Uranium-238. About 5,000 of these sets were sold before being removed from the marketplace – not because of the potential danger, but because the price of the set was considered too high for the time at $40. Although this may seem like an extreme example, the idea of providing radioactive materials to children should not have made it past the conceptual phase.

When looking at the big picture, your company should consistently review how products are evaluated, what could go wrong, and if similar products have resulted in losses and lawsuits. If the end user is a child, or if children have the potential to use the item, the standards should be much more stringent.

Design & Quality Assurance

During the design phase, there are several regulatory requirements and additional standards that may be in place and important questions a company should ask, such as:

• Are the design and engineering teams aware of the standards that may apply to a new product?
• If sub-contracted manufacturers are involved in the production process, should they have input on design? They may have pertinent insights on quality control and potential failures.
• When are prototypes are created and, if so, how are these tested?
• Are focus groups used with results being reviewed by engineering?

The design process should always be documented and include a method to review the effectiveness of the process and/or any changes to the product.

The manufacturing and quality assurance phase of product manufacturing should always address in-house vs. sub-contracted work. For example, is the product manufactured all or in-part by another company? ÌęIf so, what type of supplier/subcontractor qualification processes are in place? If your company follows industry standards and regulations, does the subcontracted manufacturer or component supplier follow a similar or higher standard? Is the supplier/subcontractor/manufacturer based in the U.S.? If not does it have a U.S. presence? If the supplier/subcontractor/manufacturer has no U.S. presence, your company could pay for any loss caused by the non-U.S. entity as your company placed to product into the stream of commerce in the U.S.

Product Sales & Reviews

Once a product is ready for distribution, there are several questions that should be asked prior to selling the product in the marketplace:

• What role does the sales team play, and is the sales network in-house or outsourced?
• Have product ads been reviewed by the design, legal, and engineering teams?
• Do you have recall procedures and/or product traceability? Can you determine if there are problems prior to a product failing or if the instructions are unclear?

It’s also important to carefully monitor social media accounts such as Yelp, YouTube, Twitter, and Google Reviews. Monitoring social media accounts allows your company the ability to ascertain that­ a product may not work properly, the user has difficulties, the directions are not clear, or that the product fails quickly. Monitoring these sites and others also allows you to determine instances of product failure and, in certain instances, to try to resolve the issue prior to it going further.

Installation, Service & Repair

Three areas that are tied together in the manufacturing process are installation, service, and repair. In each of these phases, your company can help protect itself against a product liability lawsuit by asking the following questions: When performing an installation, can it be proved that the installation was performed correctly, with all aspects of a machine functioning properly, with all guards in place?

• Are there photographs taken and is a specific checklist used?
• Are service and repair teams are performing the same checks with the equipment, and do they have documented proof that all safeties and guards were installed and functional?
• Are the service, repair, and warranty folks talking to the design team, and even sales?

Employees who work in the service, repair, and warranty departments should be having regular meetings with the design and engineering teams because this is where products may be failing in ways not originally predicted. For example, if a product is being returned with missing guards, or if the guards or warning labels are not lasting for the life of the product, the design and engineering teams need to be alerted as soon as possible. Likewise, repeated warranty issues on a specific item need to be addressed because this is where a potential recall or service bulletin may be considered. If these issues are continually popping up, the sales team will also need to be alerted when it comes to claims made about the product, warnings, changes to instruction manuals, etc.

Assessing the Big Picture

What does the big picture approach tell us about product liability and product safety? It’s easy to see that all departments and individuals must be involved in the process. From the concept and design phase, to manufacturing, service, repair, and warranty work, all employees involved should be trained and ready to alert others if they see a potential issue.

“Industry standards regarding quality and labeling should be utilized, but the process goes much deeper,” Austin said. “One missing piece may result in a situation that could result in an injury or death, plus the loss of revenue and company reputation.”

Does your program address the big picture?