As a manufacturer, have you considered what could happen if something goes wrong in your production line? What if a defective product leaves your factory doors and makes its way to a consumer? Do you know what types of warnings and labels you are responsible for? Your work does not end when your product leaves in a shipment. Liability risk management extends so much further. Consider these common claims:
1. Product Liability
The most common claim facing manufacturers, product liability is when you are held responsible for producing a defective or damaging item. Whether it causes physical harm to someone or is just proven to be dangerous, product liability can be extremely expensive and can damage a business reputation for years.
There are three main types of product liability:
- Negligence in Manufacturing: This occurs when you sell a product with a defect that later causes harm to the user. The manufacturing process itself is safe, but for some reason, the individual product was not manufactured properly. If it can be shown that this defect was due to your failure to take reasonable care, you will be responsible for damages that occurred. It is important to have some kind of inspection measure in place to ensure that defective products are discovered before they are sold to a customer.
- Negligence in Design: Similar to negligence in manufacturing, negligence in design occurs when there is a defect in the product. However, in this case, it is not that the manufacturing process went wrong for one item; it is an overall dangerous or improper design plan. For example, if it is proven that a defect was a result of the way the design process is carried out, there is a case of negligence in design. You must ensure that you are always using best practices during manufacturing and creating the safest possible products.
- Failure to Warn: If a manufacturer knows, or should know, of a danger that could present itself to a user of their products, they have to warn the consumers of this danger. All warnings must be communicated properly, and it is recommended that you use pictures as well as words. Warnings must be easy to see, permanent, and quickly understood. Neglecting to warn consumers of these dangers is an offence, and selling a product without proper warnings is punishable by law.
For a comprehensive guide to the types of product liability and how the courts handle them, check out the Canadian Product Liability Handbook.
This occurs if you say something about your product that is determined to be untrue. For example, if a food manufacturer lies about how much sugar is in their product, or a goods producer promises that their product has capabilities that it does not actually have, this is misrepresentation. The producer will be held liable for damages or for providing a replacement product.
3. Labelling Regulations
Manufacturers must ensure that they follow the best practices laid out for them while packaging their products. For example, the Consumer Packaging and Labelling Act has requirements that will allow consumers to make informed decisions. On your product, you must avoid making false or misleading statements, and state specific information such as the product’s name, its quantity, and your contact information. Core label requirements for food products include bilingual labelling, country of origin, list of ingredients, nutritional information, and more. There are also guidelines in place for specific products such as textiles, precious metals, and pharmaceutical drugs. Failure to follow these guidelines will result in an inability to sell your product. For a complete list of the requirements you must follow in labelling your products, visit the Government of Canada’s website.
Failure to take proper care as a manufacturer can have huge consequences. More than expensive liability claims and a damaged reputation, defective or mislabelled products can be the cause of physical harm to your consumers. Take care in every step of the production process, make your products safe as well as great, and both you and your product users will benefit. ClearRisk's Claims, Incident, and Risk Management System will help you stay on top of crucial information, identifying common claim areas and finding unique ways to mitigate against them. Want more information?
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