Under normal circumstances, a product is supposed to be relatively safe and meet a consumer's ordinary expectations. When the product is defective, however, a product does not meet these expectations and could therefore leave a manufacturer liable for any injuries or deaths the product causes. This is the groundwork of products liability law and is something many consumers, as well as our Albany readers, know well.
But while it's important for manufacturers to compensate damages to those affected by a defective product, it's also incredibly important for manufacturers and their insurance company to vet out claims that might try to seek damages without actually having grounds to do so. Though potentially false claims do not make up the majority of injury claims filed against companies, they can crop up from time to time, especially in situations of large recalls.
We can see the potential for this problem by considering the GM ignition switch recall from last year and the more recent Takata Corporation airbag recall. Both cases illustrate the extensive work that goes into investigating these recalls and the resulting damages class action lawsuits can have on auto manufacturers.
As some of our readers here in New York may remember, the reason behind the massive GM and Takata recalls was defective automotive parts that ultimately caused thousands to suffer injuries and nearly a hundred to die. Shortly after discovering their respective defects, both companies conducted extensive recalls to prevent further lives from being affected. In the end though, the damage had been done and injured victims and their families sought compensation through class action litigation.
GM alone faced nearly 3,500 injury and death claims, while Takata faced more than 70 claims by the start of February 2015. Instead of settling these claims quickly, though, both companies vetted the cases, making sure each one was eligible for compensation and paying victims and their families accordingly. Though this took a considerable amount of time, by vetting each case, both companies avoided being taken advantage of by potentially false claims.
As we said above, a majority of claims for compensation are likely legitimate. But in situations like the ones GM and Takata were facing, it's not difficult to imagine that a false claim could get lost in the shuffle, costing a manufacturer hundreds of thousands – or potentially millions – of dollars in compensation the plaintiff may not deserve.
Sources: The Wall Street Journal, "GM Recall Compensation Plan Sees Payouts From $20,000 to Millions," Jeff Bennett, June 30, 2015
Reuters, "Takata air bag lawsuits sent to Florida court," Jessica Dye, Feb. 6, 2015
CNN Money, "What did Mary Barra know about the GM recall, and when did she know it?" Nov. 10, 2014