Product Recalls and Managing Product Liability Claims
Description:
Assessing total exposure - where has the product gone and how many claimants will there be? ... Advert. Legal Crawford & Company International 2003. Brand management ... – PowerPoint PPT presentation
Title: Product Recalls and Managing Product Liability Claims
1 Product Recalls and Managing Product Liability Claims
Jonathan Clark - Crawford Company
February 2003
Any enquiries Contact 44 (0)207 265 0611 or jonathan.clark_at_crawco.co.uk 2 Introduction
Product liability claims pose a problem of management
Can be very public and damaging to brand
Assessing total exposure - where has the product gone and how many claimants will there be?
Commercial considerations - most claims are between trading parties and under contract
For many cases policy issues will be at the forefront of planning response- what is covered and is there damage?
If in doubt follow the product - see where the product goes and see if any claim is an isolated one off or the tip of the iceberg
3 A case study
Flavorisus plc - food ingredients and flavourings
Fax received
Customer (Safebury) analysis shows contamination with nuts in speciality product - toffee
Trace elements found by new techniques
Some customer claims already received by them
Looks like an intermittent fault
Recall requested
First intimation to us(?)
Q1 results due in two weeks so financial impact needed
4 Critical issues
Is a recall needed?
Speed of response
Network of customers
Industry specific knowledge
Traceability - developing a view of total exposure
Interrelationships of customers and their customers
Global nature of manufacturing and supply chains
Insurer attitude
5 Investigation
Initial crisis / fact finding meeting
Examine third party evidence
Initial appraisal - what is risk class
Likely causation-testing regime if needed
Search for inferred causal relationship - epidemiological approach
Potential scale of problem - where has the product gone?
Potential cost / reserve
Get all documents together
6 The crisis management team
Does the organisation have the internal resources to deal with recall issues
Advise on best course of action - act swiftly
Provide support and resources to deal with recall
Manage organisational response - decide
Minimise impact of recall on daily running of business
Ensure customer relationships are maintained - regain trust
7 Recall options
None
Withdrawal - total market
Voluntary or mandatory - remedy or replace
Public
Open
Targeted
Information release
Trade only
Silent
Targeted
8 Flavorisus-the network of loss 9 Exposure - financial picture
Understand where product has gone - who has it and in what quantities? Find out batches at risk
Need to form view of use and inclusion in users products
Are we sole supplier to claimant?
Any linked sales for the product which increases exposure i.e. product used by insured in own other products
Any contractual impact - any viable defences
Develop a budgeted model based on facts known
10 Heads of claim
Supermarkets and Processco
Direct Recall
Product cost
Product in stock
Profit - sales lost
Disposal
Management Time
PR
Advertising
Flavorisus plc
Product in Stock
Recall own Brand
Recall others
Profit - business lost
Disposal
Management Time
PR
Advert
Legal
11 Brand management
Brand equity at risk, reputation at risk
Prevent chaos in a crisis - keep in control
Communicate the brand
Apologise or explain
Dont wait
Dont create a news vacuum
Organisational structure can impede empowered action
Fear of lawsuits should be balanced against long term brand damage
12 Risk management
Pre-planning
Awareness of relevant statutes and regulations
Supplier registration programme or similar to facilitate recovery
Policy cover across the board - liability, guarantee, recall
Traceability
Full product knowledge
13 Managing the loss - a route map 14 Use of Call Centre as a filter for recall - consumer durables 15 Recall summary
Have a plan
Enact the plan
Be sure it is the insured product at fault
Dont await the writ
Manage the situation - deal direct with end consumers?
16 Some insurance and legal issues 17 An investigation route
What happened and why?
SOLUTION - what can be done?
COST - is this the right way forward?
POLICY - does the policy respond and to what degree?
LEGAL - is there a liability at law?
Key issues to consider as separate lines of enquiry
QUANTUM
POLICY
LEGAL
(Facts found may bear on each item of enquiry but benefit from individual consideration)
18 Nature of claims
Multi-claimant
Consumer Protection Act
Class action
Policy cover
Recall costs - third party and own?
Subrogation - contract and jurisdiction
19 Exposure - reserving
Understand where product has gone - who has it and in what quantities? Find out batches at risk
Need to form view of use and inclusion in users products
Any linked sales for the product which increases exposure i.e. product used by insured in own other products
Any contractual impact - any viable defences
Are we sole supplier to claimant? - check if this is credible against their known production output
Develop a model based on facts known
20 The Product Liability Policy
Any product sold, supplied, prepared, serviced or tested
Damage to material property - has there been damage?
Incorporation cases - e.g. defective ink printed on paper, car part built into car is defective car otherwise perfect
Failure to perform intended function - efficacy
Excess - single action with series of claims one claim or more
Exclusions-own product, contractual loss, design
21 Exclusion and Limitation of Liability
The Unfair Contract Terms Regulations 1994 - applies to consumers
The Unfair Contract Terms Act 1977
Section 2(1) Death or personal injury
Section 2(2) Subject to reasonableness
Section 11
The requirement of reasonableness...is that the term shall have been a fair or reasonable one to be included having regard to all the circumstances...in the contemplation of the parties when the contract was made.
22 Adjusting the loss - a route map 23 Summary - the need for a partnership approach
Insurer - pre planning of policy response
Policyholder - records and responsiveness
Damage limitation - PR response
Causation - good technical and analytical support
Management of quantum - clear view of what is at risk
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