Assess and Protect against Product Liability Claims when Entering a Foreign Market

When you enter a Foreign Market you will probably face a Product Liability regime different than the one in your home country (Similar But Still Separate and Distinct). Chances are your company is not intimately familiar with the risks in the market you plan to enter. Our experience has shown that “the unknown” can often lead to irrational decisions.

Last month we spoke with several European companies in the Medical Device industry at the MEDICA exhibition in Düsseldorf. Many told us that they were reluctant to enter the US market for of fear of the product liability regime. Almost every company had heard anecdotal evidence of a Product Liability case gone horribly wrong. The stories ar all the same. At first, one or another small successful EU device manufacturer entered the US market. Then they got wrapped up in a classaction suit, slapped with punitive damages and went out of business as a result.

Yet, many US and foreign Medical Device companies are active and thrive in the US market. They have managed to asses the risk and properly mitigate against it. Several US companies we spoke with acknowledged the higher impact of the more “aggressive” US Product Liability regime. All of the referred to is as “the cost of doing business”.

Identifying Product Liability Risk and Exposure.

Whether you’re a Medical Device company or a manufacturer of load shifting Energy Storage products, understanding Product Liability risk is the first step of a mitigation process. It is important to identify the risk factors associated with your industry, supply chain, products and manufacturing processes. Find out which factors can expose you to a product liability claim.

While Product Liability regimes in the US and in EU differ in some respects, the underlying ideas are quite similar. Factors that cause exposure in the US are often the same ones that cause exposure in the EU. The main differences between EU and US regimes is in the consequences related to a transgression.

Chances are, no matter where you are located that you already have a good grasp on the risk factors. Nevertheless, companies in highly regulated industries are sometimes mostly focused on the regulatory agency and miss identifying other risks. It is not unusual for manufacturers of Medical Devices to omit to identify risks not put forward by the FDA. External experts can help perform a risk analysis and confirm that you have identified all potential exposure.

While strategies to mitigate exposure may change between the EU and the US, many strategies are basically the same:

Design a reasonably safe product

Designing a product for which there exists no reasonably safer design will help you reduce exposure to claims. Doing so requires that you are familiar with “state of the art” technology regarding your product category. Obviously you must monitor standards governing the products you manufacture. And you must promptly update your design as you learn about safety issues. Documenting processes and their implementation will help prove your diligence when a claim is filed against your company

Manufacture a product as designed without defect.

Quality control must be part of your process. From requiring, and enforcing compliance of, quality standards for suppliers, to documenting manufacturing processes and associated quality control processes, and documenting the quality tests of the final products. A properly administered quality control process will go a long way towards proving that you have manufactured the product as designed, without defect.

Distribute proper warnings and instructions

Warnings and Instructions can help mitigate risks that can not be eliminated through proper design. . These instructions need to be appropriately written for your audience, and you must ensure that they reach the “user” of the equipment. Users can be installers, technicians using the equipment to provide services, end-users, etc.

Enable and act on customer feedback

Enabling Customer feedback allows you to learn what happens with your products after they enter the marketplace. You must review and act upon the feedback you receive. Making it easy for customers to share their experience with you will help you identify problems early on and create opportunities to improve your products. You may consider getting help when drafting proper warnings and instructions

Litigation Risk assessments

Litigation risk assessments help you considered what might happen in case someone files a claim against your product. First, the process considers the product and its labeling and then tries to identify how to protect the company and how to defend itself in case of future litigation.

Product Liability insurance

Product Liability insurance can help cover exposure. Make sure that the policy covers products manufactured or sold during the coverage period, and continues to cover these products after the policy expires.

The above lists only a few strategies that can be employed. Enlisting help from a risk managements specialist familiar with the industry and the market you want to enter will help you develop appropriate strategies and bolster your business against Product Liability claims.

It is prudent to consult legal and insurance experts familiar with product liability in your industry before making market entry decisions. Proper risk assessment and development of risk mitigating strategies requires a coordination and the involvement of several experts. GB5D can help coordinate the activities of the multiple experts needed to develop and implement a successful Market Entry Plan.

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