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Distributors Face Liability

October 9, 2006
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WASHINGTON - The National Association of Wholesaler-Distributors (NAW) recently reported that distributors, as well as manufacturers, could be subject to a wide variety of laws and regulations governing product liability. Bodily injury and property damage losses may arise from the product itself, the product packaging, instructions for use, labels, warnings and other on-product messages. The manufacturer, not the distributor, is usually held responsible for injury arising from a defective product because the distributor usually has no control over the design, assembly or quality of the item. Distributors, however, may be held liable for product defects under certain circumstances, including:

  • Some distributors provide installation, service or repair work as a "value-add" for their customers, which may increase their product liability exposure in the process.

  • Distributors that modify, repackage, or relabel products may assume a greater liability than those who don't. Modification of the product can include any modification of instructions or warranties.

  • Repackaging under the distributor's name may increase the exposure substantially.

  • The United States has some of the most stringent product safety standards in the world. When goods are produced overseas, they do not necessarily comply with these standards. When a distributor imports products from a foreign manufacturer who does not carry U.S. product liability coverage, they can assume the product liability exposure.

  • If the manufacturer is insolvent or otherwise unavailable (foreign manufacturers with no coverage inside the United States for example) the distributor can be held liable for any defect in the product.

  • When the distributor is directly responsible for the defective condition, i.e., if they have damaged the product while repackaging, or by making product modifications, they may be held liable.

  • If a distributor had knowledge of the defective condition prior to the sale and did nothing, they can be held accountable.

  • If a distributor recommended an unsuitable product for the job, they may be liable.

    A significant number of federal and state laws and regulations impact product liability, and it is important to be familiar with them. For more information, visit www.cpsc.gov.

    Publication date: 10/09/2006

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