Navigating Product Liability’s Complex Regulatory Landscape, Risk Management – March 1, 2016
Hunton & Williams
Description
Navigating Product Liability’s Complex Regulatory Landscape
by Kelly L. Faglioni
Risk Management Magazine | March 1, 2016
those scenarios based on their probability. The scope and amounts of your insurance coverage—or the
lack of it—will also impact your cost projections and contingency planning.
Having a recall plan of action is also part of managing regulatory and litigation risks. For example, a recall
under the Consumer Product Safety Act (CPSA) could require you to stop distribution of the product,
notify anyone who transports, stores, or distributes it, notify appropriate officials, give public notice of the
defect or danger, and then repair or replace affected products or refund the purchase price.
In addition, the CPSC has the authority to: 1) ban a hazardous product that presents an unreasonable risk of injury and for which no safety standard would adequately protect the public from risk, 2) obtain injunctive relief to restrain violations of the CPSA, and 3) seek civil and criminal penalties for knowing and willful violations of the CPSA. Once a company determines that it must report a product hazard to a governing agency, it can expect to undertake many if not all of these same measures either on a negotiated basis or on a “voluntary” basis even if the CPSC does not order a recall under the CPSA. But even with a good recall plan, sufficient insurance coverage and a high likelihood of a negotiated, if not ordered, recall, anticipated damage to the business and brand remains a powerful disincentive to report and recall in the face of uncertain requirements. The question may be less whether or not to recall and more about whether or not to report to a governing agency. Remember, however, that a customer or competitor may be able to force the company onto the regulatory radar, and the failure to self-report is highly correlated with fines.
So the regulatory scheme is stacked to incentivize reporting and recall. Of course, given the complexity of the regulatory landscape, it is important to address these issues before an incident occurs. By having the right plan in place, your company will be better positioned to manage the risks that arise from these product liability challenges. Meghann C.T. Supino, an associate of Ice Miller LLP, and Caryn E.
Clark, an associate with Hunton & Williams, also contributed to this article. Kelly L. Faglioni is a partner with Hunton & Williams LLP, who also serves as a Deputy General Counsel for the firm. She practices in general commercial and regulatory litigation and law firm ethics, conflicts, and risk management.
She may be reached at (804) 788-7334 or kfaglioni@hunton.com. © 2016 Hunton & Williams LLP 4 .
In addition, the CPSC has the authority to: 1) ban a hazardous product that presents an unreasonable risk of injury and for which no safety standard would adequately protect the public from risk, 2) obtain injunctive relief to restrain violations of the CPSA, and 3) seek civil and criminal penalties for knowing and willful violations of the CPSA. Once a company determines that it must report a product hazard to a governing agency, it can expect to undertake many if not all of these same measures either on a negotiated basis or on a “voluntary” basis even if the CPSC does not order a recall under the CPSA. But even with a good recall plan, sufficient insurance coverage and a high likelihood of a negotiated, if not ordered, recall, anticipated damage to the business and brand remains a powerful disincentive to report and recall in the face of uncertain requirements. The question may be less whether or not to recall and more about whether or not to report to a governing agency. Remember, however, that a customer or competitor may be able to force the company onto the regulatory radar, and the failure to self-report is highly correlated with fines.
So the regulatory scheme is stacked to incentivize reporting and recall. Of course, given the complexity of the regulatory landscape, it is important to address these issues before an incident occurs. By having the right plan in place, your company will be better positioned to manage the risks that arise from these product liability challenges. Meghann C.T. Supino, an associate of Ice Miller LLP, and Caryn E.
Clark, an associate with Hunton & Williams, also contributed to this article. Kelly L. Faglioni is a partner with Hunton & Williams LLP, who also serves as a Deputy General Counsel for the firm. She practices in general commercial and regulatory litigation and law firm ethics, conflicts, and risk management.
She may be reached at (804) 788-7334 or kfaglioni@hunton.com. © 2016 Hunton & Williams LLP 4 .
