Product liability lawsuits for manufacturing startups can be very costly and damaging.
When starting a manufacturing business, there are countless factors to consider, from production costs to marketing strategies.
However, one area often overlooked, yet critically important, is product liability.
As a startup, understanding the legal risks involved with the products you produce is essential to safeguarding your business’s future.
Product liability lawsuits can be incredibly damaging, not only financially but also to a company’s reputation.
For this reason, it’s important to learn from past lawsuits that have had a significant impact on manufacturing practices.
In this article, we will better understand product liability, how to avoid common mistakes and protect your manufacturing business from financial and legal fallout.
Table of Contents
What Are Product Liability Lawsuits?
Product liability lawsuits arise when a consumer claims that a product caused harm due to a manufacturing defect, design flaw, or insufficient warnings.
Anyone in the product’s supply chain—including manufacturers, retailers, and distributors—may bear some responsibility.
Common Types of Product Liability Claims
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Manufacturing Defects
These occur when errors are made during production.
For example, a batch of screws made with faulty metal could lead to structural failures in equipment.
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Design Defects
This type of claim focuses on inherent flaws in the product’s design, rendering it unreasonably dangerous.
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Marketing Defects (Failure to Warn or Label Properly)
If items don’t include clear instructions, hazard warnings, or disclaimers, you could face liability if a consumer uses the product incorrectly and gets hurt.
Understanding these types of claims is essential for protecting your startup.
5 Major Product Liability Cases Every Manufacturing Startup Can Learn From
You can prevent product liability lawsuits for manufacturing startups by learning from these major cases:
1. The Toyota Unintended Acceleration Case
In 2009, Toyota faced one of the largest product liability lawsuits in automotive history.
The case was sparked by reports of unintended acceleration in some Toyota vehicles, leading to several fatal accidents.
Consumers claimed that the vehicles accelerated without warning due to a defect in the electronic throttle control system.
After an investigation, the National Highway Traffic Safety Administration (NHTSA) found that Toyota had been slow to respond to the issue.
As stated in a Yahoo! article, the company started receiving complaints in 2004 itself.
However, most early complaints were disregarded, stating that it would have happened due to the driver’s error.
It was in 2009 when a high-profile Lexus crash brought global attention to the faults in Toyota’s vehicles.
The company’s executives also testified in front of the US Congress and accepted their mistake.
The automaker eventually recalled millions of vehicles and paid out billions of dollars in settlements.
Toyota’s experience highlights the importance of rigorous testing and quality control in manufacturing.
For startups, ensuring that products are designed and tested properly before they hit the market can prevent costly lawsuits and damage to brand image.
Learn whether employers are liable for workplace injuries to employees or contractors?
2. Aqueous Film Forming Foam Lawsuit
Aqueous Film Forming Foam (AFFF) has been widely used to eliminate liquid fires caused by oil, gas, electricity, etc.
Although extremely effective at putting out fires, AFFF contains harmful ingredients called per- and polyfluoroalkyl substances (PFAS).
As an NCBI study notes, firefighters’ exposure to these substances is declared as an occupational hazard.
AFFF containing PFAS are known to cause various types of cancer.
TruLaw states that AFFF lawsuits have been brought against manufacturers who produce these harmful chemicals.
Plaintiffs alleged that manufacturing companies knew or should have known about the potential hazards.
However, they chose not to warn the users so that it doesn’t decrease their profits.
The plaintiffs are seeking fair compensation to cover their losses and damages due to this negligence.
Anyone who has suffered an injury or damage due to these products can file an AFFF lawsuit.
They can consult with an experienced lawyer who can help them traverse the legal landscape.
These cases have been a wake-up call to many businesses dealing with potentially dangerous materials.
For manufacturing startups, this case is a cautionary tale about the importance of thoroughly understanding the products they create.
It is also important to ensure that the components they use are safe for consumers and workers alike.
3. The Johnson & Johnson Talcum Powder Lawsuit
Thousands of women claimed that Johnson & Johnson’s talc-based baby powder caused ovarian cancer after long-term use.
The main link between talcum powder and cancer is stated to be the presence of asbestos.
According to the World Health Organization, all six primary forms of this substance are declared to be carcinogenic to humans.
Asbestos exposure can increase the chances of lung, ovary, and larynx cancers.
In 2020, a jury awarded $2.1 billion in damages to 20 women who had filed a lawsuit against the company.
These cases cited the company’s negligence in failing to disclose the risks associated with their product. The company has agreed to settle all the current and future claims against its talcum powder.
Data shows that the overall settlement amount can exceed $9 billion over the span of 25 years.
It recently added $1.1 billion in the settlement amount in September 2024. Its subsidiary has filed Chapter 11 bankruptcy to complete the settlement.
This case serves as a critical reminder for manufacturers of all sizes to ensure that the safety of their products is well-researched.
Moreover, it should also be transparently communicated to consumers.
In an era where consumers are increasingly aware of potential risks, products should meet safety standards to prevent future lawsuits.
4. The Volkswagen Emissions Scandal
In 2015, Volkswagen was embroiled in a major scandal for installing software in its diesel vehicles to cheat emissions tests.
According to the BBC, the software allowed the vehicles to pass emissions tests while emitting illegal limits of nitrogen oxides.
As a result, the company faced both criminal charges and civil lawsuits.
The Volkswagen case is an example of how unethical practices can lead to severe product liability issues.
It underscores the importance of transparency and integrity in product design and manufacturing.
Manufacturing startups should avoid shortcuts that could compromise the safety or legality of their products.
Being upfront about a product’s potential limitations or risks can help maintain consumer trust and avoid costly legal battles.
5. The Takata Airbag Scandal
Takata is a Japanese automotive supplier known for manufacturing airbags.
Data shows that its airbags were installed in vehicles manufactured between 2002 through 2015.
However, they were later found to have a dangerous defect: the inflators could explode with too much force. This could send shrapnel into the vehicle.
The defect resulted in multiple deaths and injuries and led to one of the largest recalls in automotive history.
Therefore, around 67 million airbags were recalled to prevent accidental deaths.
Recent reports show that 88% of all defective airbags were repaired or replaced by April 2024.
The Takata case serves as a powerful reminder of the importance of safety testing and oversight in manufacturing.
It also highlights the consequences of ignoring potential risks to save costs or cut corners.
This is not only a legal obligation for manufacturing companies but also a moral one.
The Takata scandal showed that putting profit over safety can have catastrophic results.
The Impact of Product Liability Lawsuits on Manufacturing Startups
When you’re just starting, the stakes are high.
A single product liability lawsuit could derail your entire operation.
Here’s what’s at risk:
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Financial Losses
Legal fees, settlement costs, and potential fines can add up quickly, potentially exhausting your resources.
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Damaged Reputation
If word spreads that your products are unsafe, it could discourage future buyers and damage trust within your target market.
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Loss of Partner Support
Retailers, distributors, and suppliers may sever ties with companies facing liability claims, fearing association with the controversy.
By putting safeguards in place early, you can mitigate these risks and ensure your business remains on solid footing.
How Manufacturing Startups Can Reduce the Risk of Product Liability Lawsuits
Follow these 6 steps to prevent product liability lawsuits for your manufacturing startup.
Step 1: Prioritize Product Testing and Quality Control
Set up rigorous testing protocols during development and production to ensure consistent quality and safety.
Work with experienced engineers, implement stress tests, and consider third-party audits for added credibility.
Checklist for Quality Assurance
- Regular inspections of raw materials.
- Monitoring production consistency.
- Post-production testing for defects.
Step 2: Clearly Label and Warn Consumers
Provide simple, easy-to-understand instructions and warnings, even for seemingly intuitive products.
For example, include safety icons and multi-language instructions to prevent misuse.
Learn why disclaimers and warnings are SO important in any business.
There are different kinds of disclaimers depending on your business such as:
Step 3: Have Robust Insurance Coverage
The right insurance policy can act as a shield for your business. Consider policies such as:
- Product Liability Insurance: Covers legal fees and settlements up to a certain limit.
- Business General Liability Insurance: Offers broader protection that includes property damage or injury claims.
Speak to a small business insurance specialist to tailor a plan suited to your startup’s needs.
Step 4: Document Everything
From production batches to safety tests, keep detailed records.
Should you face a lawsuit, this documentation could serve as evidence that you followed all reasonable safety precautions.
Step 5: Consult a Lawyer
Working with an attorney specializing in product liability law—especially one experienced with startups—can provide personalized advice and proactive measures.
They can also guide you in drafting terms of service and liability disclaimers to further safeguard your operations.
Pro Tip: Some startups find pre-made legal document templates helpful for tackling key agreements and policies without spending a fortune.
Step 6: Stay Updated on Regulations
Regional and national product safety standards frequently change.
Ensure your business stays compliant with entities like the U.S. Consumer Product Safety Commission (CPSC) to avoid potential violations.
A quick example? Child safety guidelines for toys have tightened over the past decade.
Failing to comply with such updates could make you vulnerable to litigation.
Frequently Asked Questions about Product Liability Lawsuits for Manufacturing Startups
When it comes to product liability lawsuits for manufacturing startups, here are answers to common questions.
What is product liability, and why is it important for manufacturing startups?
Product liability describes the legal accountability of producers, retailers, and distributors for harm brought on by faulty goods.
It is essential for startups because the discovery of dangerous or deceptive products can result in significant monetary losses. I
t can also cause harm to the company’s reputation and even lead to the closure of the organization.
How can a manufacturing startup protect itself from product liability lawsuits?
Startups can lower the risk of product liability cases by carrying out comprehensive safety testing, following industry standards, and keeping clear records.
They should also give precise warnings and usage instructions.
Purchasing product liability insurance can also provide financial security if a lawsuit is filed.
Are product recalls always required in a product liability case?
Not all the time.
Certain cases end in monetary agreements without necessitating a complete recall.
However, regulatory organizations may order a recall if a product presents a safety concern.
To safeguard customers and reduce legal risks, companies might also voluntarily recall products.
Can a small manufacturing business survive a product liability lawsuit?
Yes, but only with preparation.
Proper insurance and legal guidance can minimize financial damage, while strategic communication can help preserve your brand’s reputation.
Do I need a lawyer for every new product I launch?
Engaging a lawyer to review each new product is advisable, especially for items tied to high-risk industries (e.g., industrial equipment, food/beverage production).
For simpler products, leveraging legal templates can reduce costs.
When is a consumer at fault instead of the manufacturer?
If a product is misused in a way contrary to the provided instructions or warnings, the consumer could bear responsibility.
Proper labeling is critical to proving this in court.
Final Thoughts on Product Liability Lawsuits for Manufacturing Startups
By learning from these significant product liability lawsuits, manufacturing firms should avoid similar errors.
They demonstrate the obvious repercussions of ignoring safety, openness, and moral behavior.
Startups can better position themselves to thrive in a competitive market and avoid expensive and reputation-damaging litigation by taking note of these instances.
Prioritize product safety at all times, carry out exhaustive testing, and communicate openly with your clients.
These actions will safeguard your company and position you for long-term success.
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