You have a product liability subrogation claim on your desk, and with a little research, you find there is a recall notice for the defective product that resulted in your insured’s damages. Can it help your case? Hurt it? In this episode of On Subrogation, RG partner and insurance attorney, Steven Alsip, discusses how you can leverage a product recall notice to support your subrogation case in litigation.

Understanding Product Recalls & Their Role in Subrogation Cases

When a product enters the stream of commerce, consumers rightly assume the product is safe and effective. Unfortunately, this isn’t always the case, whether due to negligence, supply chain issues, or production defects not detected until after the product entered the marketplace. In these cases, the manufacturer, government, or distributors of the product will disseminate a product recall notice.

A product recall is a request from a concerned party involved in the production, distribution, or oversight of a defective product for consumers to take action. Sometimes, as in many recalls for specific defective car parts, the request may be to return to the manufacturer and have the product replaced or repaired. Other time, as in recalls for meat or produce, the request is to dispose of the product due to public health and/or safety dangers.

In a subrogation case for product liability, recall notices can come in handy in proving your argument. However, rules of evidence apply and the manufacturer will likely try to prevent the recall from being admitted, so by no means is it a golden ticket to subrogation recovery. Understanding how product liability insurance claims work, avenues to recovery, and admissibility play in will help you develop an effective strategy for proving manufacturer liability in consumer product subrogation.

Product Liability Subrogation: Proving Your Case in Court

In product liability subrogation, you can pursue recovery for financial and non-financial damages like injury, illness, loss of income, and pain and suffering. The plaintiff has to argue several points in order to meet the burden of proof that manufacturer negligence led to the damages:

1. The product caused the injury.
2. The product was defective at the time it left the manufacturer.
3. The product defect is what caused the injury.
4. The plaintiff was using the product in the way it was designed to be used.

There are three avenues to subrogation recovery in product defect claims. You can argue:

1. The design of the product was defective.

The design of the product was the direct cause of injury.

• The product deviated from the intended design in production.

There was nothing wrong with the design, but the way it was manufactured compromised the design and that was the direct cause of the injury.

• The manufacturer failed to warn about certain uses of the product.

If there is a foreseeable risk that the product will be used in a certain way that would make it a dangerous item but failed to say anything about it and that foreseeable use, even if incorrect, was a direct cause of the injury.

Some products are very specific and do not pose a danger, so there won’t be a public recall, like a defect on a car window seal. But since the vast majority of products in the stream of commerce are mass produced and may pose a risk, most product defect subrogation cases involve widely-distributed products where thousands of units on the same line all have the same defect. This is characteristic of food product recalls.

A manufacturer can send a proactive recall or be compelled by the government to do so. The primary regulatory bodies that can compel recalls are:

• The Consumer Product Safety Commission (CPSC) has jurisdiction over a broad range of consumer products and can order recalls if there is an unreasonable risk of injury or death.
• The Food and Drug Administration (FDA) has jurisdiction over foods, medications, cosmetics, medical devices, and other health products that may pose health risks or violate safety regulations.
• The Food Safety and Inspection Service (FSIS) is the USDA’s regulatory body; they have jurisdiction over products with meat, poultry, and eggs.
• The National Highway Traffic Safety Administration (NHTSA) has jurisdiction over motor vehicles and related equipment and can compel recalls for vehicles or parts with safety-related defects.
• The Environmental Protection Agency (EPA) has jurisdiction over chemicals and other materials that can pose an environmental hazard and/or public health risk, like pesticides.
• The US Coast Guard has authority over recalls related to recreational watercraft.

How Does a Product Recall Notice Play into Litigation?

Product recall notices are typically sent by mail directly to the consumers, but they may also be announced on news outlets, retailers, distributors, etc. Government agencies, the manufacturer, or other involved/interested entities may post the recall on their websites and social media. Expect the product manufacturer to use that as support for their case:

1. The insured received the recall; they’re the negligent one!

In the course of a subrogation case, the product manufacturer will likely argue that since there was a recall notice issued, the plaintiff was acting negligently because they had received and/or should have otherwise known the notice was out. However, the insured could have ignored the mailed notice or just not seen it; those things aren’t negligence.

As a result, the fact the insured simply received the notice isn’t a dealbreaker. Let’s say this is the case in your product liability subrogation claim: there is no dispute the notice was issued and the insured received it. Now the manufacturer has to prove the recall would have been effective at curing the defect it was meant to address.

2. We acted in good faith; you shouldn’t use the recall against us!

Many courts allow recall notices to be admitted to evidence, which does a lot of the heavy lifting in proving product liability. A faulty switch sparked and caused a fire; improperly manufactured shingles let water through, causing the roof to rot and eventually collapse. The recall itself wouldn’t remedy those; the insured would have had to make a homeowners insurance claim and wait for professionals to come fix the problem.

The manufacturer may argue the recall notice was a remedial measure, which would make it inadmissible under Federal Rules of Evidence 407. 407 excludes remedial measures as a good-faith protection; the manufacturer tried to let consumers know about the issue so they shouldn’t have that thrown in their face in court.

However, while in this scenario a product recall notice may not be admissible to argue negligence, it can still be admissible to support other aspects of your subrogation liability claim. You can use it to show other certain facts, such as that the company at issue owned the product and the manufacturer was aware of an issue with the product.  This effectively brings into the case that the recall existed, thereby helping to promote the subrogation case without it being entered for the purpose of acting as an admission of the defect.

Pro Tip: Who Posted the Product Recall Notice Matters

The other thing to look out for is whether the recall was proactive or compelled by the government. If the government forced the recall notice, the remedial measure rule doesn’t apply. The rule is meant to encourage companies to act ethically and in the interest of consumers; if the government forced the recall, they do not get protections and the recall can be admissible.

Subrogation Strategy for Proving Product Liability

Like many aspects of insurance and subrogation lawsuits, different states handle product recall admissibility differently – some expressly allow all recalls, others by rule or case law, or excluded only if the manufacturer can prove the remedial measure rule applies. In the case of Rhode Island, they specifically allow product recalls into evidence even when subsequent remedial measure applies.

Regardless of how you leverage a product recall notice in litigating a subrogation claim, a recall will not be enough to win the case, and it may not even be enough to make an out-of-court subrogation agreement in mediation or arbitration. There are often many interconnected pieces in these cases.

Consider the faulty switch resulting in fire subrogation: was it really the defect or did a wiring issue contribute? Or the roof shingles in property subrogation: was it the shingle defect or did the installer fail to line the roof properly? The initial investigation by claim adjusters is crucial in product liability claims, because you will almost certainly need scientific evidence, witness statements, experts, and other supporting evidence.

Interested in more education about subrogation? Visit Rathbone Group’s Subrogation Blog, YouTube series, and podcast, On Subrogation, where our lawyers break down important legal topics like this in a digestible format. Have a question or subject you want to know more about? Reach out at info@rathbonegroup.com to inquire about our services or suggest your topic for a future episode of On Subrogation.