November 2012

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Page 33 of 59

Rental Understanding and Reducing Product Liability Claims A primer for equipment lessors BY JAMES WAITE Of the many different types of liability faced by equipment lessors, "Products Liability" lawsuits probably present the greatest threat. But what are they, and how do they differ from other forms of liability? Definition Products Liability is a broad legal theory of liability that permits injured parties to sue both the product manufac- turer and all parties in the "chain of distribution" (Restate- ment (Third) of Torts: Products Liability, 1998), including equipment lessors (See, e.g., Cintrone v. Hertz Truck Leasing & Rental Service, 212 A.2d 769, NJ S.Ct., 1965) for injuries and damages arising from the use of equipment. Such liability is generally premised on one of four legal theories: (1.) Negligence (2.) Breach of Warranty (3.) Misrepresentation (4.) Strict Liability in Tort when a product is rendered "unreasonably dangerous" as a result of: a. Design Defects. When the foreseeable risks of harm posed by the product could have been reduced or avoided by the adoption of a reasonable alternative design by the seller or other distributor or a predecessor in the commer- cial chain of distribution b. Manufacturing Defects. When the product departs from its intended design even though all possible care was exercised in the preparation and marketing of the product c. Warning Defects. Where the foreseeable risks of harm posed by the product could have been reduced or avoided by 32 | www.cedmag.com | Construction Equipment Distribution | November 2012 the provision of reasonable instructions or warnings Warning Defects have historically generated the majority of Strict Products Liability claims against equipment lessors. Such claims generally involve allegations that the lessor failed to properly warn the customer of a potential hazard associ- ated with a "foreseeable" use of leased equipment. Strict liability without any need for proof that the defendant was at fault can be imposed for "manufactur- ing defects" (liability for design defects and warning defects does typically require proof that the seller/lessor was somehow at fault). Consequently, a rental operator's alteration of its equipment can yield this broad form of liability. "Strict manufacturer's liability" has now also been expanded to "suppliers of used products" thereby opening the door to such claims against rental operators merely because they act as "suppliers" of rented equipment (even if they haven't altered it). In such cases, the plaintiff need only show that (A) the product was somehow "unreason- ably dangerous," and (B) the plaintiff was injured in some way as a result, in order to recover damages from the manufacturer, seller and/or lessor. Thus, an equipment lessor may find itself being held legally liable if a piece of its equipment proves defective, even if the lessor had no knowledge of the defect and was not at fault in any way. Courts, however, generally do acknowledge that some types of equipment simply cannot be made safer without losing their usefulness (for example, chainsaws). Because consumers are generally the parties best equipped to minimize the risks, and because such risks are often readily apparent, such products are usually not deemed (continued on page 34)

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