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The Legal Perils of Customer Service

How to Help You and Your Customer

A manufacturer’s duties are very broad and encompass many different layers of the chain of production. In addition, some of these duties extend to those in the chain of distribution, namely, distributors, dealers, retailers, and service personnel.

Here are some of the types of customer service advice that can create the most significant risks:

  • Pre-sale advice by the manufacturers of the finished product (original equipment manufacturer, or OEM) to an end customer who wants help in deciding what product to buy and how to use it safely and correctly.
  • Pre-sale advice from the customer service personnel of a component parts supplier to an OEM or a higher tier supplier who wants to know what component to buy and how to use it or install it correctly.
  • Post-sale advice from customer service personnel to customers as to how to use the product safely. This could help the customer with assembly or installation, or to help solve a specific problem.
  • Post-sale investigations after a customer has suffered an incident or a “near miss.” The incidents could involve the product not operating properly or damage to the product or other property, injury, and death.
  • Post-sale advice to customers about a recall, repair, or some other corrective action undertaken to fix a safety issue involving the product.

This article will discuss the legal responsibilities of different entities in the supply chain and offer practical advice on how to meet those responsibilities.

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Pre-Sale Law

Rarely are totally new products manufactured that don’t evolve from earlier products made by that OEM or another OEM. Therefore, there is lots of information that has been developed or should have been developed that will inform an OEM about the safety and quality of a predecessor product, how consumers use similar products, and what kinds of problems consumers have when using the product.

Any manufacturer of a finished product or a component part needs to consider this information, especially on prior product designs, and how the products have been used and misused in the past. Is this information available, adequate, misleading, incomplete, overstated, or understated? Does the manufacturer need to search their databases to find such information received from consumers or talk to dealers and retailers about problems earlier consumers have had or almost had? And are competitors of similar products having the same or other problems?

Some of this information can be found in the various U.S. Consumer Product Safety Commission (CPSC) incident databases or by simple internet searches using keywords for the finished product or component. There are also legal databases that keep track of some lawsuits and settlements or verdicts involving those products. Also, some trade associations or standards groups might be willing to inform you about product problems, incidents, and lawsuits involving that category of products.

Gathering all the information that is readily available will be helpful in identifying problems or potential problems that need to be considered by the manufacturer as they design a new product or redesign an earlier version of the product. This information then can be considered during the manufacturer’s risk assessment.

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If the manufacturer misses pertinent information from consumers or elsewhere that might have changed the product’s design, warnings, instructions, or marketing literature, they could be liable for selling a defective product and their conduct might be deemed “negligent.” With some of this information available, the manufacturer has an opportunity to better anticipate potential problems so that they can take steps to mitigate the risk.

While a lot of this information should be obtained by the design engineers, it is true that much of this information could be obtained by customer service personnel of the manufacturer, the dealer, or the retailer. So someone needs to search for it as it will not get to the design engineers unless someone in customer service believes that it is pertinent to future designs or to fixing a product in the field.

 

Post-Sale Law

It is after the sale of the product, whether a finished product or a component product, where customer service is most important. The customer service personnel are the eyes and ears of the manufacturer. Now there are questions, issues, and problems being raised by dealers, retailers, and customers that relate to products that were just sold.

The law is very broad in this area and the consequences of doing a poor job of identifying and analyzing post-sale risks are very significant. In most jurisdictions in the U.S., manufacturing, designing, and selling safe products does not totally satisfy a product manufacturer’s legal duties. U.S. courts have held that manufacturers have a duty to warn product users when they learn of risks in their product after sale, even if the product was not defective when sold.

Case law requires manufacturers or product suppliers, in certain instances, to provide post-sale warnings or possibly to recall or repair their products. In analyzing possible post-sale liability, it is important that manufacturers and product suppliers be aware of the factors that may trigger a post-sale duty under common law. In addition, manufacturers and product suppliers need to be familiar with post-sale duties imposed on them by U.S. government agencies and, if the product is sold outside the U.S., by foreign government agencies.

Armed with this knowledge, they can establish procedures to identify and quantify the existence of risks and implement appropriate post-sale remedial measures to prevent or limit their post-sale exposure.

The law concerning post-sale duties is based on negligence. And it is clear that the product does not have to be defective when it was sold. One description of the law is as follows:

“One engaged in the business of selling or otherwise distributing products is subject to liability for harm to persons or property caused by the seller’s failure to provide a warning after the time of sale or distribution of a product if a reasonable person in the seller’s position would provide such a warning.” Restatement 3rd of Torts (Products Liability), American Law Institute.

And the “reasonableness” of the seller is based on these four factors:

  1. The seller knows or reasonably should know that the product poses a substantial risk of harm to persons or property; and
  2. Those to whom a warning might be provided can be identified and can reasonably be assumed to be unaware of the risk of harm; and
  3. A warning can be effectively communicated to and acted on by those to whom a warning might be provided; and
  4. The risk of harm is sufficiently great to justify the burden of providing a warning.

Thus, a jury could hold a manufacturer liable for violating its post-sale duties if these four factors are proven.

Customer service personnel will be aware of and provide information to the company that they receive after sale that could help the seller conclude that the product poses a substantial risk of harm to persons or property. And if they don’t have this information or didn’t provide it to the relevant people in the organization, then the manufacturer could be considered negligent.

On this point, the law says that the general duty of reasonable care may require manufacturers to investigate when reasonable grounds exist for the seller to suspect that a previously unknown risk exists. However, to put some restrictions on this broad duty, the law says that “constantly monitoring product performance in the field is usually too burdensome” and not doing so will not support a claim of violating a post-sale duty.

Despite this language, plaintiffs have tried to use the law to impose a broader duty on product suppliers to establish systems to obtain information from the field. The failure of a manufacturer to set up a system to gather post-sale information and then claim a lack of knowledge may appear unreasonable to a jury, especially when this information could be obtained with little effort and expense.

In addition to receiving calls from customers and dealers, the growth of the Internet and social media has made it even easier to find post-sale information and easier for manufacturers to receive this information from those who want to communicate with them about it. However, much of this information will be unverified, and possibly overstated, inaccurate, or incomplete. Consequently, manufacturers must decide how to follow up and when to investigate such reports to determine the facts and to minimize avoidable problems that these reports identify.

Being aware of all information—good and bad, true and untrue, complete and incomplete—can be helpful if a company can identify and verify the important information, adequately evaluate and document it, and take any warranted corrective actions.

 

Pre-Sale Safety Systems and Customer Service

Obtaining necessary information before the design and sale of the product is an essential part of any manufacturer’s product safety management program. Those designing new products, along with the product safety professionals, need to identify the information they need to meet their responsibility to sell a compliant and reasonably safe product. It is going to differ depending on the product, prior experience with similar products made by the manufacturer or others or with safety-critical components, the existence of any standards or regulations that apply to the product, and the occurrence of any incidents, claims, or litigation that pertain to the product or any of its components.

Some of this information is not easy to obtain. And trying to confirm its accuracy and interpret what it means can be difficult. But any diligent manufacturer must try their best to get what information they need or be prepared to explain later why this information isn’t important or difficult to obtain.

Customer service personnel can be helpful or harmful in this phase of development. I worked for a component supplier who asked me to interview their customer service personnel about the advice they gave during the sales process. OEMs would call them and ask for a recommendation on which of their components to buy. The customer service personnel didn’t know when to give a recommendation and when not to.

Many times, the OEM could not tell the component supplier where the component would be used and the temperatures, pressures, and contaminants to which the component would be subjected. In that case, they weren’t sure what component and what size would be appropriate. But they wanted to be helpful and didn’t want to jeopardize a sale. I thought it was acceptable to give such advice if they clearly documented what the OEM told them about how the component would be used and told the OEM that their recommendation is based on this information. So, if the information is incorrect or changes later, then the recommendation is not valid. In any case, it should be clear that the final decision is the OEM’s and not the component part supplier.

Some component part suppliers tell their customer service personnel that they aren’t allowed to give advice even if the OEM knows exactly how they are going to use the component. They want the OEM to rely on the catalogs and other marketing literature to select the correct component. This seems a little too protective and the component part supplier should want to be sure that the OEM purchases the correct component and installs it correctly.

Many times, the component part supplier will know or should know that the component is incorrect for a particular use. However, they don’t want to miss out on a sale. When the component doesn’t work correctly and litigation ensues, both parties will blame each other, and it is very difficult to figure out who was at fault. Documenting the sales process by customer service personnel can help to understand the history of what was said by different parties.

 

Post-Sale Customer Service

When we think of customer service, we usually think of questions and contacts by customers to the OEM’s or seller’s customer service personnel after sale of the finished product. This is the most important function for customer service and the one that can most impact safety and liability.

Things come up after sale that may indicate a potential or real current or future safety issue, a reporting responsibility to the CPSC, and a possible corrective action or recall with products in the field. What is written or not written, what is investigated or not investigated, and what information is obtained can have a huge impact on future safety actions and help or hurt in the defense of litigation.

After advising companies on product safety efforts over many years, I can say that most companies have customer service programs that could be improved, some significantly. And the lack of good customer service procedures and documentation makes the job of analyzing future safety risks much more difficult. This can result in more accidents, more risk of being fined for late reporting by the CPSC, and more difficulty in defending claims and lawsuits.

One of the main deficiencies in customer service efforts is a reluctance to get sufficient information from a customer or a person who was injured. It is a real dilemma. Customer service views their job as helping the customer, not giving them the third degree to determine what or who caused the accident and injury. However, trying to figure out what happened and what caused it is key to determining how to respond to the customer and what, if anything, needs to be done with products already sold.

Don Mays, in an article in ADK’s 2023 Product Safety and Recall Directory, said the following about questions to ask when an injury or damage occurs:

“Say, for example, a consumer calls a company and claims that the company’s product caught fire. Did the product actually catch fire, or did it almost catch fire? Were there visible flames or was it just smoke or did the product get very hot? Were the flames contained in the product itself, or did they escape the product? Was anyone or anything burned? If someone was burned, did they seek professional medical treatment for the burn or did they self-treat?

 “If professional medical treatment was sought, was the treatment in a clinic or a hospital emergency room? Were they admitted to the hospital? Was there a diagnosis citing the severity of the injury … first-, second-, or third-degree burn, for example? Can they provide any documentation or a photo or video evidence of the problem? And should the agent ask for the customer to return the product for further examination by the companies’ engineers?”

An additional problem is deciding what to do about a customer that is clearly exaggerating their injury or describing an accident scenario that is implausible. Challenging a customer’s story is very awkward and tricky, given the goal of trying to appease a customer and resolve their problem.

It is hard to ask a mad or grieving customer or parent these questions. But it is imperative to get this information to decide what to do with this contact. Should it be escalated for follow-up by the safety group, or should an investigator contact the customer and do a more professional and comprehensive investigation?

For any matter reported to the CPSC, the agency will want this information so that they can evaluate whether and when a matter should have been reported and what kind of corrective action may be appropriate. In addition, the CPSC may do their own in-depth investigation in which the injured party may also misstate what happened and minimize any mistakes they made in using the product.

 

Guidelines for Customer Service

Every customer service group needs to establish policies and procedures that are appropriate for their product, their risk, their field experience, the type of questions coming from consumers, and the answers that the consumer expects to receive. They are also based on factors such as the experience of the customer service personnel, the customer service scripts that are created and how closely these personnel must stick to the script, how many calls are received monthly and how many of them involve injuries. Also, relevant to consider is the quality and quantity of product safety professionals at the company and their expertise with the products.

There are a number of “best practices” identified by various documents that a company can refer to in setting up a customer service function. These are contained in various standards that talk about product safety, product recalls, and complaint handling. ISO 10002 is an extensive standard that just focuses on complaint-handling procedures. Its title is “Quality management — Customer satisfaction — Guidelines for complaints handling in organizations.” It has sections on guiding principles, complaints-handling network, planning, design, and development of a complaint-handling system, operation of the process, and maintenance and improvement of the complaint-handling process. Also see ISO 10377 which focuses on product safety and ISO 10393 which deals with recalls.

I have some suggestions from my legal perspective that you should consider. These may or may not be contained in these standards.

  • It is acceptable to say that you are sorry that the incident or problem occurred, but don’t admit liability unless the company has decided to try to compensate the customer for such an incident.
  • Don’t discuss other similar problems or incidents that have been reported to the company. However, tell the caller that the company really wants to know what happened and why so that it can try to reduce the chance of incidents similar to theirs happening again.
  • Document what the consumer says but make it clear that they are the ones who are saying it. Don’t say things to the consumer that make it look like you agree that the product caused the incident and is unsafe.
  • If what they tell you sounds implausible, don’t tell them that. But ask more questions in a non‑judgmental way to try to clarify what really happened and why.
  • Develop a list of trigger words which, if used by the customer or dealer, will cause the contact to be escalated to someone higher up in customer service or to someone in the product safety department.
  • Don’t offer to the consumer any opinions or conclusions as to what you think happened and why unless you are confident that the company will agree with what you say.
  • Don’t promise to tell them the results of your investigation. But if they insist, tell them that you will have someone report back to them. This should be in writing.
  • If someone has been injured, find out exactly what happened prior to the accident. This involves the injured and anyone else who was nearby. Find out about the environment, time of day, weather, lighting, etc. Get detailed information on what happened to the injured and what they did about it – seek medical assistance, where, and what kind of treatment. If they say there was a fire or explosion, don’t just take their word for it. Ask more questions as to exactly what happened and what they saw.
  • If the caller is willing, do a Facetime, Zoom, or Teams call so you can see them, and they can see you and they can show you the product and show you exactly how they used the product and what happened. Record the call if they agree to it.
  • Find out where the product is now. If appropriate, ask if a company person can come see it or if the customer would be willing to send it back for inspection.
  • Properly categorize and route the complaint. After your initial investigation is complete, categorize it according to its level of risk and potential for future incidents. Forward the investigation, consumer data, and product data to the proper department in the company.
  • Develop monthly reports that clearly show the number of calls, the reasons for the calls, any incidents or near misses, and why they may have occurred, and route the reports to upper management and the Law Department. If you have a product safety committee, also send the reports to committee members and periodically discuss the results of these contacts and investigations with them.
  • Select customer service personnel who can ask good questions, ask appropriate follow-up questions, and who can document the answers properly. Train these personnel and other company personnel who may be in contact with customers or suppliers about information gathering and escalation procedures.
  • Train dealers about these procedures if customers are likely to contact dealers about safety problems.
  • Ask retailers whether they are doing their own investigation and the circumstances in which they request that the customer contact the manufacturer. Inform retailers what kinds of customer contacts should be routed to the manufacturer and how to route them.

 

Conclusion

Every company’s complaint-handling process is going to be different. However, the standards and guidelines mentioned in this article are ideas that should be considered when establishing a program. Every company should develop a program that is adequate for their purposes and one that they feel comfortable defending if it is under attack by the CPSC or a plaintiff’s attorney.

Whatever you do, someone will argue that you should have done more. The goal of any program is to find out what is helpful to manufacturers and consumers and what might be considered reasonable by a jury. Do the best you can do, document the process, continually evaluate whether it is serving your needs, and improve it if necessary. Whatever you do, you always want to look like you are diligent in learning about safety issues and doing whatever is necessary to solve them and preventing them from occurring again in the future.

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