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Questions about liability when manufacturing high performance parts?

Discussion in 'The Garage' started by 1-ton, Mar 11, 2006.

  1. 1-ton

    1-ton 1/2 ton status Premium Member

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    I am not sure what forum to post this in. The Vendor forum would be nice, but since I do not have a Vendor account I cannot.

    I would like to hear from some of the people around here that make parts for our trucks on how they handle the issue of liability. I was interested in things like:

    • Do they carry liability insurance?
    • Do they use some type of contract that helps them limit their liability for the parts they sell?
    • How common is it to get sued by people?
    • How do they deal with quality issue, which makes sure they do not have liability issues?
    • How common is it to use ANSI guidelines to make their parts
    • Do ANSI guidelines really help to limit liability?
     
  2. 1-ton

    1-ton 1/2 ton status Premium Member

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  3. cbbr

    cbbr 1 ton status GMOTM Winner

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    I don't manufacture parts, but will offer this -

    Do they carry liability insurance? You better, or just make sure that you don't own anything that a lawyer can take.

    Do they use some type of contract that helps them limit their liability for the parts they sell? Not worth the paper that it is written on in most jurisdictions.

    How common is it to get sued by people? Its like parachuting, you may not get sued often, but it really only takes one time.

    Do ANSI guidelines really help to limit liability? No experiance here either, but I would think that they would help a court decide in your favor.
     
  4. Leper

    Leper 1/2 ton status

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    Every time I get something from ORD, it comes with a 2 page long written statement that basically tells me not to use it. That is an exaggeration, but it says it's your fault if you kill yourself or break something because you were the one who installed it. You decided to use it. Call them.
     
  5. shane74

    shane74 1/2 ton status

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    Insurance? - Yes, you definitely should. Kind of like a bond for a contractor, only different. ;)
    Contract? - Depends on what we're doing. For instance, we are doing a SAS on a Ford Ranger for a customer. I made him sign all kinds of paperwork before we even touched it. Basically, we are building the rig for OFFROAD purposes only and that he assumes any and all liability for driving the thing as soon as it leaves our shop.
    Sued? - Yes, it can and will happen eventually. Better to go see an attorney when you draw up all the paperwork for oyur company (especially if you have partners) and talk about retaining his services should the need arise.
    ANSI - Yes and no. Mainly applies towards the engineering aspect, but you would be amazed at how sh*tty some vehicles are made.

    I know, not much info, but if you are considering starting a company to make custom fabbed parts, be VERY careful, VERY cautious, and do a LOT of research before you do. It can be vrey fun and very frustrating at the same time.
     
  6. HarryH3

    HarryH3 1 ton status Author

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    The most important step you can take in to incorporate the business. This protects your personal assets in the event of a lawsuit. Yes, you should carry insurance, but if the business is run as a Sole Proprietership, then you personally would be responsible for any amount not covered by insurance. :yikes:

    Definitely something that you want to get a good attorney involved in helping you set up properly. The book Inc. and Grow Rich has a good overview of the how, why, etc.
     
  7. 1-ton

    1-ton 1/2 ton status Premium Member

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    Thanks for the replies.

    After doing some research on this issue, I have found that product liability insurance would cost me somewhere in the neighborhood of $60,000 annually. This is way out of line for any small business. I read one report, which indicates as much as ¾ of all small businesses, which manufacture a product, do not carry liability insurance because it is too expensive.

    Product liability seems to also be a major factor in why many manufacturing jobs have gone overseas. There are horror stories where an American manufacture of sewing needles had a consumer stick it in their eye, and then successfully sued the company in court. The company was able to avoid paying on the settlement by filling for bankruptcy, and reorganizing as another entity, but where then hit with major civil penalties (like a traffic ticket) levied by the American Government.

    An American company cannot get out of these penalties, and the Government can seize all a companies owners/officers personal assets regardless of protections provided through incorporating, homesteading, or trusts. The American Government can also charge interest on these penalties, as much as 28% compounded monthly. The reason why manufacturing goes overseas is because the American Government cannot enforce any (Consumer Affairs Act) penalties, civil case judgments, or punitive damage awards on over seas companies. We can all thank lawyer/politicians for this.

    A lot of the product liability lawsuit frenzy apparently started in the mid to late 80’s, when trial lawyers lobbied Capitol Hill to change the current consumer protection laws, which had to prove a more narrow interpretation of “intentional malice” before a law suite could go forward, to a much wider interpretation “disregard”, which would be the new standard for litigation.
     

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