In 2019, personal injury cases for product liability increased by 36 percent. In Lex Machina’s 2020 Product Liability Litigation Report, the number of product liability cases in the U.S. federal court system reached an 8-year high – an upward trend since 2015. With so many high-profile product liability lawsuits like Johnson & Johnson vs Martinez and The Owens Corning Corp settlement garnering press attention, product liability is becoming much more prevalent on the risk radar for businesses.
Under the Consumer Protection Act, product liability can leave a manufacturer liable for damage if its products are found to be defective. As a result, it can leave your brand facing a personal injury lawsuit and brand defamation. Here’s why product liability is so important for brands today.
Products Represent The Brand And Your Bottom Line
Every product or service a business chooses to sell/endorse reflects on its brand. It is a representation of its quality standards and goals. A company that does not prioritize customer safety is seen in a negative light by customers, which can be very damaging for a brand and its market valuation. Product recalls and product liability lawsuits influence what consumers think of your brand – even if they haven’t purchased a defective product.
For instance, General Motors has been deemed the ‘poster child for product liability lawsuits’ after a few successive years of cases being filed against it. In one of the most popular cases, approximately 124 deaths were linked to GM’s faulty ignition switch. During the legal proceedings, it was also revealed that the company was aware of the fault, and continued to manufacture cars with defective parts.
Proven Product Negligence Could Mean Significant Financial Repercussions
Product liability gives the company the financial responsibility of compensating those affected. In some cases, this can be disastrous for a company’s cash flow and profits. A great example is the recent high-profile Johnson & Johnson baby powder and Risperdal lawsuit. As of 2019, the company was facing thousands of product liability lawsuits from its range of products, including its talcum powder and Risperdal, an antipsychotic drug. In the Risperdal case, the courts went on to award an $8 billion punitive damage judgment to Nicholas Murray.
Having poor branding will cost the business more in the long run as well. Companies with poor branding pay 10 percent more in salaries, according to a Harvard Study. Since the lawsuits, Johnson & Johnson has spent millions in legal fees and has embarked on marketing campaigns to rebuild its brand – unnecessary additional expenses they now need to contend with. Another product liability lawsuit was also filed against the company was for having asbestos in its talcum powder.
Exposure to asbestos for pregnant women may have an indirect effect on the mothers and babies. The company was rumored to be preparing a $3.9 billion settlement for the case in February 2021.
A Product Liability Lawsuit Could Mean The Loss Of Important Business Relationships
Finally, failure to prioritize product liability could lead to the loss of valuable business partners and colleagues. Instances of product liability lawsuits could cause business partners and clients to change their minds about working alongside a brand with a damaged reputation. This is because they may not want the negative association to impact their brand. The loss of these business relationships could restrict business growth, marketing, and funding opportunities.
Every business needs to plan for all of the risks it anticipates facing, including product liability risks. Thinking ahead and implementing measures like securing product liability insurance is not just proactive: it is protective.