Out-Law / Your Daily Need-To-Know

Controlling product liability and recall risk

Out-Law Guide | 10 Mar 2020 | 4:12 pm | 2 min. read

There are some measures that businesses must routinely take if they are to minimise risk from their products.

These may appear mundane and many businesses assume these measures are in place, but we have found when auditing companies that it is very common for processes and systems to be incomplete or incompletely implemented.

These are the gateways that allow poor product into the field and product risk to escalate even to the point of causing recalls.

Contracts

Review sale and purchase terms at least every three years.

Review your implementation systems to make sure terms are likely to be incorporated and you know when they are not.

Have exception reporting where your terms are rejected.

Audit supplier & customer contracts regularly to check that:

  • your terms are agreed/incorporated in fact;
  • if not agreed what terms you have contracted on;
  • identify key suppliers and customers and focus on these;
  • evaluate the risk posed by given suppliers/customers not contracting on your terms;
  • evaluate supplier credit worthiness/insurance backing.

Systems

Have a responsible manager to undertake and document product risk assessments and implement/evaluate risk control systems.

Regularly assess the risks that your product might pose both to safety and commercially.

Are there effective and complete systems addressing the main risk areas posed by the product for safety and recall purposes?

Audit your R&D, suppliers, goods inward, work-in-progress (WIP) and finished goods recording, sampling, traceability and quality assurance (QA) systems – are they demanding enough?

  • are they documented in a structured way and for sufficient time periods?
  • are samples, QA and R&D records retained in a structured way?
  • are critical suppliers quality audited at the outset and periodically?
  • are sampling systems in place and statistically valid?
  • is good traceability maintained from supplies, through production and to end customer?
  • are processes and product requirements documented and observed in production?

Product crisis planning

Plan for a product crisis in advance. Have a team which is familiar with the issues and is trained. Have a crisis plan with pre-developed materials and think about a communications strategy.

Gather information

Capture field and factory information about faults: what are they, how many are there, when were they discovered, what are the batch details?

Collect as many samples as possible, take photographs, find inspection reports, identify common factors, identify the affected population.

Beware of admissions in internal or external documents, including emails, before position is established and advised on.

Safety risk assessment

Once enough information is available assess the likelihood of injury and the likely severity.

Notify regulators

Once there has been a risk assessment and lawyers have advised, consider whether you are obliged to notify a regulatory.

Be prepared to advise what corrective/recall action is being taken and why or why none is appropriate.

Get advice

Involve your lawyers from the start to guide on:

  • safety and recall obligations;
  • use of privilege to avoid open admissions that can be used against you;
  • use of privilege to cloak fault investigations;
  • documenting fault and scale for loss recovery or defence purposes;
  • clearance of PR releases/announcements/recall notices.

PR

If the issue is likely to be large scale or serious, involve PR professionals to support communication with press, customers and government. Ensure that a point of contact for all media enquiries is established and brief all staff, including those answering phones, to direct all queries to the point of contact.

Consider material to include on website.

Insurers

Notify any liability or recall insurers urgently. Seek to keep insurers abreast and bought in to any recall activity.

Team

Assemble a senior crisis team to be responsible for and to coordinate the handling of the issue.

Product

Consider quarantining product that is suspect in a factory, warehouse or distribution chain while information is gathered and assessed.

Recover and store in conditions where it will not degrade fault examples or all recalled product if possible and practical to evidence any recovery claim.