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# 1430 - PRODUCT LIABILITY: BUYER BEWARE
Product liability can be confusing and difficult to understand. Simply stated, in today's marketplace the approach to product liability must be: "Let the seller beware!" Consumerism has become an important political force, and courts at all levels have responded with more decisions holding manufacturers and sellers directly responsible for damages/injuries resulting from defective products or improper product use.
Perhaps the most radical change in product liability laws concerns negligence. The courts have adopted a new doctrine--strict liability in tort--under which an injured plaintiff can recover whether or not the manufacturer or retailer is at fault. This doctrine makes it imperative that power equipment dealers take precautions before and during the sale, lease, rental, or loaning of equipment.
The dealer may believe that it is the manufacturer who is fully responsible for injuries arising from products they sell. This just isn't so. The dealers are by far the handiest party to sue. They are the ones who deal with the ultimate consumer. They will probably be the one the injured party first seeks out to compensate them for the injuries. Even if the manufacturer eventually ends up paying the damages, the merchant is almost certain to be a defendant in the case, and will have to provide for their defense in court--either directly or through their insurance company.
In product liability cases, the greatest danger to the retailers of power equipment is that they will be liable for injuries arising from their own negligence or their own expressed or implied breach of warranty. Their salespeople, in the enthusiasm to make a sale, may misstate the safety or fitness of a product which later causes injury. Dealers may be directly liable when they add to, take away from, or alter the product in any way. Other means of their liability may be injuries resulting from misdelivery, improper storage, or deterioration due to mishandling or excessive time in stock before sales.
What You Can Do...
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Insurance Provision for rental contracts
An insurance provision, like the one printed below, can help protect a dealer's interests.
Lessee, at all times, shall maintain general liability and "all risk": physical damage insurance with insurance companies reasonably satisfactory to Lessor. In no event shall the personal and bodily injury liability be less than $500,000 for a single occurrence, nor shall property damage liability be less than $500,000. All such insurance shall name Lessor as an additional insured. Lessee shall immediately or within five (5) days from execution of this lease/rental, provide lessor with an appropriate loss payable certificate and a certificate of liability insurance. Such certificates or policies shall provide Lessor with a minimum of ten ( 10) day notice of cancellation.
Case #1: A dealer sold a hay baler. His customer was trying to clear it. He caught a trouser leg in the gears, was drawn into the machine and killed. The dealer claims that the customer was given a brochure and owner's manual that outlined safe operation. But, he has no records to back him up. The heirs have brought suit.
Case #2: A dealer sold a lawn edger. The edger was resold twice before the final owner's two-year-old son lost an arm in an accident. A suit has been filed alleging a defect in the machine. The dealer recalls guards and an instruction manual were a part of the first sale, but has no records to prove his point.
Case #4: A dealer sold a used combine. His customer stumbled and fell into the gathering chain. His hand and arm were severely injured. The suit says a protective guard was missing. The prior owner will state in court that the guard was in place when the machine was traded in. The dealer claims he had no reason to remove the guard. But, has no records to prove it was in place when the combine was resold.
Case #5: A dealer sold a new grain auger. Nine months later, a child lost an arm in the elevator mechanism. The lawsuit claims the equipment was sold without guards. The manufacturer has records that show guards and an operators manual were shipped to the dealer with the auger. The dealer has no records.
Case #6: A dealer sold a used lawn mower. Eight years later, his customer lost a hand while trying to unclog it. The lawsuit claims the dealer failed to provide guards and warning decals. The dealer thinks the guards were in place--but can't recall for sure. There are no records to support his belief.
Case #7: A dealer rented a piece of industrial equipment. His customer removed a guard to grease the chain drive--and lost his hand. The lawsuit says the contractor wasn't given operation instructions when the equipment was delivered. The dealer's salesman emphatically claims that instructions were given. There are no records to prove his point.
Case #8: A dealer leased a backhoe/loader. His customer was killed when the machine tipped over. There wasn't a lawsuit. You see, the dealer had instructed the customer about the use. hazards. and inspection of the forklift. And, there were records kept for documentation.
Case #9: A lawsuit claims the customer's hand was crushed by a forklift he bought from the dealer. The dealer has complete sales and service records. They show that other equipment was sold to the customer, but not the one causing the injury. The attorney will ask that the dealer be released from the suit.
Case #12 A dealer sold parts for a log chipper but did not install them. His customer's employee lost an arm and three fingers installing the parts. Two years later, the dealer was named in a suit along with the manufacturer. The dealer says he did not sell or repair the machine--and, in fact, his records show the parts were shipped directly to the customer. The attorney will ask the dealer be released from the suit.
-- April 2006, Federated Insurance, Seller Beware
ARE YOU LIABLE?
Under products liability law, both a dealer and a manufacturer can be held liable for losses involving personal injury and property damage. However, a dealer may be dismissed from a products liability claim if the dealer meets certain conditions.
A seller is defined as a person who only sells the equipment and does not repair or alter or in any way add to the dangerous condition of the equipment. Therefore, a dealer who does nothing more than sell the product may be dismissed if the manufacturer or other party in the lawsuit has the financial ability to make the plaintiff whole.
Insurance and Indemnity Agreements
We suggest that the best protections available to dealers are insurance coverage and indemnity agreements with manufacturers. Indemnity agreements must be included in the sale documents between the dealer and the manufacturer and must be broad enough to include any judgment or settlement of claims for personal injury caused by the operation of the equipment sold. It is important for dealers to be aware of the defenses available to them under products liability law.
-- November 1992, Jack Selzer, Western Assn's Western Retailer. Jack Selzer a partner in the law firm of Seigfreid, Bingham, Levy, Selzer & Gee, is legal counsel for Western Association