The New Wave of Product Claims Involving Overseas Production Practices

2009 | Topic: Product Liability

The news has been full of product claims based upon overseas manufacturing or production processes, such as those involving contaminated pet food and lead painted toys.  These cases have raised some interesting issues:

• In Re Mattel Inc. Toy Lead Paint Products Liability Litigation [588 F.Supp.2d 1111 (11/24/08)]

            In granting in part and denying in part a motion to dismiss a consumer class action against a number of retailer and manufacturer defendants, the U.S. District Court for the Central District of California ruled that a voluntary product replacement, pursuant to federal Consumer Product Safety Commission regulations, does not bar a state law claim under the California Consumer Legal Remedies Act (CLRA).  The court also ruled that out-of-state plaintiffs could state a claim against defendants under California state laws for alleged violations of CLRA and section 17200 of the California Business & Professions Code when they are harmed by wrongful conduct that occurs within the state.

• ACE American Insurance Co. v. RC2 Corp., Inc.[586 F.Supp.2d 946 (6/26/08)]

            A recent decision from the U.S. District Court for the Northern District of Illinois provides an overview of  insurance coverage issues related to overseas manufacturing cases. The case sought declaratory relief regarding an insurer’s duty to defend a toy manufacturer in product liability actions involving allegations of lead paint poisoning where the toys were manufactured in China, but the harm alleged was from use of the products in the United States.  The policies at issue provided coverage for any “occurrence” taking place within the policy’s “coverage territory.”  The “coverage territory” under the policy included all parts of the world except the United States.  The parties argued whether the terms should be construed to refer to the allegedly improper application of lead paint, which occurred in China, or the alleged injury to plaintiffs, which occurred within the U.S.  The court concluded that only the cause of the harm, rather than the harm itself, need occur within the coverage territory for coverage to be triggered.  The court granted the manufacturer’s summary judgment motion and held that the insurer was obligated to provide a defense under the policy.