Electronic nicotine and non-nicotine delivery systems, more commonly known as e-cigarettes, represent a global market worth almost $10 billion. In the United States alone, e-cigarette sales reached about $4.1 billion in 2016. But as the market continues to grow, reports of exploding e-cigarettes have raised concerns about product safety and liability.
In September 2015, for example, a California jury awarded almost $1.9 million to a plaintiff whose e-cigarette battery exploded, causing second-degree burns. Other common injuries resulting from e-cigarette explosions include second- and third-degree bodily burns, fractured palate, fractured teeth, and other maxillofacial injuries.
Because e-cigarettes contain a number of component parts including a lithium-ion battery, an atomizer to heat the liquid, a cartridge to hold the liquid, and a microprocessor, there are many manufacturers, suppliers, retailers and wholesalers that can be named as defendants in a lawsuit. It is critical, therefore, to understand the precepts underlying the litigation of e-cigarettes as the industry evolves.
Strict Products Liability
In e-cigarette litigation, the primary causes of action are strict products liability and negligent products liability. A cause of action for strict products liability requires the plaintiff to establish that he or she was harmed by a product distributed, manufactured or sold by the defendant and that the product contained a manufacturing defect, was defectively designed, or did not include sufficient instructions or warning of potential safety hazards. A manufacturer, distributor or retailer is liable if a defect in the manufacture or design of its product causes injury while the product is being used in a reasonably foreseeable way. Strict liability has been invoked for three types of defects: manufacturing defects, design defects and “warning defects,” (i.e., inadequate warnings or failures to warn). Beyond manufacturers, anyone identifiable as “an integral part of the overall producing and marketing enterprise” is subject to strict liability.
The design defect theory, which has two tests in California, is most common in e-cigarette litigation. Under a consumer expectation test, a product is defective in design if: 1) the product has failed to perform as safely as an ordinary consumer would expect when used in an intended or reasonably foreseeable manner; or 2) in light of the relevant factors, the benefits of the challenged design do not outweigh the risk of danger inherent in such design. In the context of e-cigarette litigation, 80% of the explosion incidents reported occurred while the e-cigarette lithium-ion battery was charging. Lithium-ion batteries must be charged in accordance with the manufacturer’s instructions using an authorized USB charger, although it is reasonably foreseeable that a person may use another USB port to charge the e-cigarette.
Under a risk benefit test, the plaintiff may establish the product is defective by showing that its design caused the injury and the defendant then fails to demonstrate that, on balance, the benefits of the challenged design outweigh the risk of danger inherent in the design. In such a case, the jury must evaluate the product’s design by considering the gravity of the danger it posed, the likelihood such danger would occur, the feasibility of a safer alternative design, the financial cost of an improved design, and the adverse consequences to the consumer resulting from an alternative design. The jury must consider the manufacturer’s evidence of competing design considerations, and the issue of design defect cannot fairly be resolved by simply referring to the “expectations of an ordinary consumer.”
In addition, the plaintiff may proceed under a warning defect theory within a strict products liability claim. Even a product flawlessly designed and produced may nevertheless possess such risks to the user that it becomes defective simply by the absence of a warning. Thus, manufacturers have a duty to warn consumers about the hazards inherent in their products. A duty to warn or disclose danger arises when an article is or should be known to be dangerous for its intended use, either inherently or because of defects. There can be no liability for failure to warn where the instructions or warnings sufficiently alert the user to the possibility of danger, however.
Negligent Products Liability
Another primary cause of action in e-cigarette litigation is negligent products liability. To establish this claim, a plaintiff must prove all of the following: 1) that the defendant designed, manufactured, supplied, installed, inspected, repaired or rented the product; 2) that the defendant was negligent in designing, manufacturing, supplying, installing, inspecting, repairing or renting the product; 3) that the plaintiff was harmed; and 4) that the defendant’s negligence was a substantial factor in causing the plaintiff’s harm. An entity is negligent if it fails to use the amount of care that a reasonably careful designer, manufacturer, supplier, installer or repairer would use in similar circumstances to avoid exposing others to foreseeable risk of harm.
In determining what precautions, if any, were required under the circumstances, the likelihood of harm and the gravity of the potential harm, must be balanced against the burden of the precaution that would be effective to avoid it. Expert testimony about the safety of a product, in light of industry standards, can also take into account other applicable and relevant circumstances. A danger is unreasonable when it is foreseeable, and the manufacturer’s ability to forestall unreasonable danger is the measure of
its duty in the design of the product. Thus, an e-cigarette defendant faces a significant likelihood of a meritorious plaintiff’s case when the plaintiff alleges a negligent products liability cause of action due to the industry standard of care.
Insurance Coverage Implications
The many components of an e-cigarette, from the atomizer to the battery, complicate the dynamics of liability insurance in this industry. Even if the insurer only provides liability insurance for a manufacturer, supplier or distributor of an atomizer, the liability policy will likely trigger a duty to defend the insured where an exploding battery caused injury to the e-cigarette user. The duty to defend may likely exist even with a clear disclaimer limiting coverage only to the insured’s atomizer because all components of the e-cigarette work together to produce vapor.
Therefore, even where a complaint identifies a battery explosion and not necessarily an atomizer defect as the cause of the plaintiff’s injuries, a duty to defend the insured (i.e., a manufacturer, supplier or distributor of an atomizer) may arise because all e-cigarette components are dependent on each other. Moreover, the named defendants will likely pursue indemnity and comparative fault against other such entities in the stream of commerce for the particular e-cigarette at issue. As such, insurance carriers should make sure that coverage is appropriately priced and underwritten, given the risks associated with liability.