D&O Duty to Defend vs. Reimbursement PoliciesWith an increasing number of common items adopting high-tech features, there are new ways for things to go wrong. From home devices that can be hacked to automated vacuum cleaners that may catch fire, innovative products are creating unexpected product liability risks for manufacturers.
More Automation Creates Risk for Unsupervised Exposures
Many people recommend not leaving common household appliances running when no one is around to watch them, such as when everyone’s sleeping or out of the house. If a dishwasher leaks or a clothes dryer catches fire when no one is home, there will be no one around to mitigate the damage.
What does this mean for appliances that are explicitly designed for remote and automated operation? If consumers use these appliances when they are not around, they won’t be able to respond quickly to any issues that arise.
According to Property Casualty 360, a homeowners insurance company paid $691,305.12 to settle a claim after a robotic vacuum cleaner allegedly became jammed and caused a fire. The insurance company has filed a lawsuit against the manufacturer.
This is not the only time a robotic vacuum cleaner has been linked to a fire hazard. According to WPLG Local 10 News, one person was airlifted to a hospital after a robotic vacuum caught fire, apparently due to an exploding lithium battery.
Smart Devices and Cyber Risks
Smart devices also create cyberattack risks. For example, a hacker may access a smart device to monitor the owners, launch phishing attacks, gain access to other devices on the network, or even control the device remotely.
When smart device vulnerabilities leave users exposed to cyberattacks and privacy violations, lawsuits may follow. In fact, several lawsuits have already occurred. According to Investor’s Business Daily, a lawsuit filed against Mattel claims that Hello Barbie (an interactive doll) recorded and stored children’s voices without parental consent. Bitdefender says families have sued Amazon after their Ring security cameras were hacked. In one case, a hacker used Ring to harass an eight-year-old. In another, a hacker used Ring to blast sirens and demand a ransom.
According to the IoT Magazine, product liability for IoT devices depends on state-level laws and legal rulings. However, manufacturers, distributors, retailers, and other parties involved in IoT development and product support may be named in lawsuits.
New federal guidance may increase the risk of liability. According to Cybersecurity Dive, a new national cyber strategy holds private sector companies liable for the security of their products. This guidance may lead to new legislation to increase liability for software products and services.
Risks Stemming from Generative AI
Products that leverage generative AI may also contribute to new product liability risks.
Generative AI sometimes produces incorrect or even harmful messages. It’s easy to see how bad advice could lead to real-world damage. For example, people who follow a chatbot’s advice on matters related to nutrition, exercise, or medication may inadvertently hurt themselves if the advice is not sound. People could also damage or destroy their belongings by following faulty repair advice.
There have already been instances of AI chatbots providing dangerous information. In one case, People says a man in Belgium died by suicide after a series of disturbing conversions with an AI chatbot. Wired says another chatbot has been discontinued after it gave out advice that may be dangerous for people with eating disorders. Lastly, AP News says a chatbot offered by New York City to help small business owners gave advice that would result in business owners breaking the law.
As more developers incorporate generative AI into products, evolving product liability risk deserves consideration. Generative AI is a fairly new technology. Stanford University says courts will have to grapple with the question of who is liable when AI says something harmful.
Could Lawsuits Target Your Products?
New technology helps make products more convenient and safer. However, there are also product liability risks to consider when devices use automation or are connected to the internet.
Is your company protected against lawsuits? Heffernan Insurance Brokers will help you review your exposures and product liability insurance options. Learn more.
