Hunton Retail Law Resource

The CPSC extracted another steep civil penalty this month from a manufacturer of coffee brewers that agreed to pay $5.8 million after it knowingly failed to report a defect or unreasonable risk of serious injury to the CPSC. Specifically, the manufacturer received roughly 200 reports in a four-year period about its coffee brewers spraying out hot liquids and coffee, inflicting burn-related injuries to consumers. As part of the settlement, the manufacturer also agreed to develop, implement and maintain a compliance program to avoid failure-to-report problems in the future. Perhaps the recent change in CPSC leadership will impact the frequency or amount of these civil penalties in the future.

February also saw a noticeable increase in recalls, many of which involved furniture and children’s products. A whopping 10 recalls in a three-week period addressed a wide range of defective furniture, such as dressers, chairs, benches and tables. These defects resulted in over 500 total injury/incident reports and pose hazards like tip-overs, falls and lead paint exposure. This troubling development shows that the CPSC has been quite active in responding to defective furniture—a trend that was fueled last year by dresser tip-overs.

Children’s products, such as nightlights, strollers, toys, jackets and swings—always a CPSC focus— accounted for six February recalls. And the big story here concerns the strollers: 33 reports of seats unexpectedly disconnecting and falling to the ground, plus 1,337 reports of damaged receiver mounts. Given the fall risks for young children associated with these defects, the CPSC will likely take an active approach to managing this recall.

Recalls continue to be a hot topic in insurance coverage litigation as well. On February 10, 2017, Starr Surplus Lines Insurance Company (“Starr”) sued CRF Frozen Foods, LLC (“CRF”) to rescind the policy issued to CRF. Starr alleges that, prior to submitting its application for insurance, CRF was aware of circumstances likely to give rise to its 2016 recall of frozen vegetables. The alleged circumstances, which Starr claims were not shared during the application period, include “violations” identified by Washington State and federal inspections. Starr also sued Houston Casualty Company, the follow-form excess carrier, which Starr claims asserted positions inconsistent with Starr’s determination of coverage.

Starr’s suit comes on the heels of its success before the Third Circuit earlier this year. In January 2017, the federal appellate court affirmed Starr’s rescission of a recall policy issued to Heinz based on alleged misrepresentations about its claims history at the application stage, which left Heinz uncovered for the $25 million loss it sustained after Chinese authorities discovered lead in its baby cereal.

Total Recalls: 25

Hazards: Fall (8); Fire/Burn/Shock (6); Tip-Over (3); Injury (3); Lead Exposure (2); Laceration (2); Choke (1).

Click on the below chart for additional information.