As companies begin to dig out of the current pandemic and consider or re-evaluate business continuity plans, it is time for in-house counsel, risk managers and CLOs to consider ways in which to mitigate risks, including legal, operational and corporate. Here are a few considerations when contemplating risk assessments:
1. Conduct an Insurance Risk Assessment
i. Conduct a risk assessment of insurance policies. Such an assessment must be conducted to create a business risk profile to identify factors that have the greatest financial impact on the company as well as to identify appropriate risk transfer strategies to:
a) Stabilize insurance costs;
b) Mitigate extraordinary financial impact;
c) Ensure cost effective protection against catastrophic losses;
d) Optimize tax and accounting issues.
ii. Conduct an analysis of current coverage, amounts, deductibles, excess.
iii. Evaluate all insurance policies and insurance companies- coverage, costs, etc.
iv. Investigate establishment of captive insurance company.
v. Review insurance brokers to determine if the right programs are being put out to bid
vi. A review of all claims should be performed
2. Review Litigation Considerations of the Company and /or its Foreign Business Operations or Subsidiaries:
i. Affiliated companies or subsidiaries can be named as defendants. These companies will need coordination of defense and discovery matters. How do the companies handle this?
ii. Consider jurisdiction over foreign entities, including the parent entity.
a) Jurisdiction Issues
b) Maintaining Corporate Compliance
iii. Litigation Respecting Same Products in Multiple Jurisdictions-issue for electronics companies and home appliance manufacturers
iv. Insurance coverage-is it adequate? Has it been reviewed?
v. Litigation issues must be reviewed such as:
a) Coordinating billing from local counsel.
b) Insurance coverage notices and claims and updating carriers.
c) Budgeting for cases.
vi. Currently, many large US companies and subsidiaries of non-US based companies have numerous insurance related lawsuits involving class actions, product liability claims, bankruptcies, employment cases and antitrust and regulatory issues. These should be reviewed.
a) Product Liability Actions
b) Patent Actions
c) Regulatory Proceedings and Investigation
d) Commercial Disputes
e) Product Liability Costs
3. Consider Typical Legal Theories on which a Plaintiff May Base a Products Liability Claim and Class Actions In US and Elsewhere:
i. Breach of Express Warranty.
ii. Breach of Implied Warranty.
iv. Strict Liability.
v. Deceptive and Unfair Trade Practices ("DUTP").
vi. Consumer Class Actions
4. TO ADEQUATELY PROTECT AND DEFEND AND MITIGATE THE RISK OF A COMPANY AND ITS U.S. AND FOREIGN SUBSIDIARIES, NUMEROUS PROCESSES AND PROCEDURES SHOULD BE IMPLEMENTED AND REVIEWED BY LEGAL COUNSEL AND/OR RISK MANAGERS. SUCH PROCESS GOALS ARE:
i. Product Risk Management Goals.
a). Encourage correct product use, increase customer satisfaction and minimize possible injury from use.
b). Improve ability to defend the company in the event of litigation by developing and substantiating defenses to liability, reducing exposure to liability, for example, by removing grounds to impose punitive damages.
ii. Adopt Product Loss Control Policy and Procedures which include:
1. Requiring product group or divisional officers to develop programs consistent with corporate guidelines.
2. Establishment of a group Claims Defense Committee.
3. As a part of the Research – Design – Development process, conduct formal hazard/failure evaluations on all new products.
4. Publish Quality Control Standards and Procedures for all components, materials, and processes critical to product, service, safety, and reliability.
iii. Product Management Consideration Respecting Limiting Potential Liability Exposure – Develop Checklist to include in Product Readiness Approval Objectives Including Product Design Considerations:
a) Written procedures for the design program, including:
b) Design choices – consideration of alternatives.
c) Specifications – definition of acceptable ranges of variation for each characteristic to assure that all designs are reviewed before they are released to manufacturer.
d) Establish a design review committee.
a) Review all published statements about the products including advertising, product listings and catalogues to assure that they do not: mislead users, encourage users to disregard directions and warnings contained in the labeling, or promote unapproved or inappropriate uses.
b) Include provisions in distribution and purchasing agreements so that distributor and/or purchaser will:
(i) complete and return surveys and questionnaires
(ii) notify the company of any product failures or malfunctions