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Talc, product liability insurance and recent class action lawsuits

Here's what insurers should know

Most mainstream beauty brands have at one time used cosmetic talc in manufacturing. (Image: ALM Media file photo)
Most mainstream beauty brands have at one time used cosmetic talc in manufacturing. (Image: ALM Media file photo)

We’ve seen it before with lead paint, tobacco products, ignition switches, and asbestos building materials: a class action lawsuit can quickly become a nightmare for insurance providers.

Related: 10 emerging developments in liability insurance

In the recent past, several juries have handed down very large verdicts against talcum powder (talc) defendants. Notable among them has been Johnson & Johnson, costing the company almost $200 million in 2016 alone.

Key legal developments


Three verdicts from 2016 occurred in St. Louis, Missouri, a jurisdiction known to be favorable to asbestos plaintiffs, and included considerable punitive damages for the plaintiffs. Those verdicts suggested that exposure from the talc in J&J’s baby powder caused ovarian cancer in the plaintiffs. Juries have also found that talc powder is connected to mesothelioma, and can be contaminated with asbestos.

More recently, though, J&J achieved a dismissal in New Jersey, and a trial win in Missouri. What's more, a couple of similar cases were thrown out of the New Jersey court for lack of scientific support of the plaintiffs allegations.

Likely due to the recent more positive outcomes of the litigation, J&J has decided to appeal another verdict handed down in St. Louis in which a woman claimed talcum powder caused her to contract ovarian cancer, the verdict demanding a payment of more than $100,000 in punitive damages.

Lay of the land


There are two types of talc: industrial talc and cosmetic talc. In its natural form, some talc contains asbestos.

According to the American Cancer Society, all talcum products that are manufactured for household use have been asbestos free since the 1970s.

The talc that is allegedly at fault in the J&J cases is cosmetic talc, which is used to absorb moisture, soften or smooth other cosmetic products, and to prevent cosmetics from caking. While industrial talc has been blamed for asbestos exposure and resulting asbestoses for decades, cases alleging injury from talc are relatively new, as the recent uptick in J&J cases about cosmetic talc have shown. These allegations that women have contracted ovarian cancer because of cosmetic talc represents a new class of toxic product liability cases.

Thousands of companies have used talc in their cosmetic products in the past several decades, including Maybelline, Dior, New York Color, LA Colors, Revlon, Almay, Clinique, Wet n’ Wild, Johnson and Johnson, Dollar General, CVS, and Rite Aid. Because of this widespread use of talc in popular products, almost the entire population could claim exposure to talc. For the ovarian cancer cases, though, the talc has to be used to aid in feminine hygiene, so the exposure rate is much smaller than that for a potential asbestos talc claim.

Popular, mainstream product


Because of its widespread use, almost everyone can accurately claim that they have had exposure to cosmetic talc. It follows that the focus of the lawsuits is not the exposure itself, but instead the causal connection between talc exposure and the injury, which in these cases is ovarian cancer.

While there have been some successful cases, recent decisions have shown doubt that talc and ovarian cancer are causally related. The research that has been done on talcom powder and its correlation to ovarian cancer has had mixed results. Some studies have reported that talc users have a slightly increased risk of ovarian cancer; others have reported no increased risk.

Research in the area is ongoing, since cosmetic talc is widely used in many products and it is important to determine if an increased cancer risk is real for users.

Analysis brought to you by the experts at FC&S Online, the unquestioned authority on insurance coverage interpretation and analysis for the P&C industry. To find out more, visit www.nationalunderwriter.com/FCS.

A 2012 study showed that the average jury award for product liability suits was $3,439,035.00. (Photo: iStock)

A 2012 study showed that the average jury award for product liability suits was $3,439,035.00. (Photo: iStock)

Liability insurance and dangerous product litigation


Product liability refers to the liability of parties along the chain of manufacture of any product, for damage caused by that product. If a product injures a person or causes property damages due to negligence on the part of a manufacturer, they may be found liable and forced to pay damages. This includes the manufacturer of component parts, assembler, wholesaler, and retail store owner.

Related: Is that claim covered?

In the J&J cases, there are a few parties that can be found liable, including the company who supplies the talc for J&J, Imerys Talc.

Having product liability insurance is an important choice for manufacturers to make. Here's why:

        • These policies can be flexible in what is and is not covered;
        • They can be designed to protect the insured against a wide range of exposures, from a faulty blade cover to failing brakes.
        • Defects in the product, packaging, or lack of clear instructions can be covered.

Two things must be present in order for a product liability insurer to respond to a claim:

        1. There must be bodily injury or property damage, allegedly caused by a product that the insured company has manufactured and placed into the stream of commerce.
        2. The injury or damage must occur in the coverage territory, and must take place during the policy period.

Related: Processing Product Liability Claims

Typically, product liability is obtained through a general liability policy. But insureds should be aware that not all general liability policies include product liability exposure coverage.

 

Under the standard GL policy, the injury or damage must result from an "occurrence," which is an accident including repeated or continuous exposure to the same harmful conditions. Once the product enters the consumer stream, injury or damage that results from the product would fall under the "products-completed operations hazard" classification, which is injury or damage arising out of "your product" or "your work."

Most product liability policies provide coverage for injury or damage caused by the sale or supply of the insured’s products, solely in the course of business and during the policy period. As is typical of most liability coverage, the insured must be legally liable. However, strict liability can be covered as well, depending on the policy and the product.

Some products are dangerous enough that even if the manufacturer did nothing wrong they can be held strictly liable for any injuries resulting from the use of the product.

Related: Product Liability: Under the Microscope

Shopping liability policies


There are several things a consumer should be aware of when choosing a product liability policy, because the coverage that is provided in the end is determined by the specifics of the policy from the beginning:

          • Coverage territory generally includes the United States and its territories, possessions, Puerto Rico, and Canada, and extends to airspace and international waters only when travelling to and from any of the above destinations.
          • Coverage territory mostly becomes an issue when consumers take a product out of the country and injury or property damage occurs there.
          • In order for an insured to ensure coverage they should make sure the product is made and sold in the United States.
          • The policy period is the period of time between when the coverage begins and ends.
          • Standard liability covers only injuries that the insured comes to know about within the policy period, and if that issue is exacerbated after the insured switches carriers, since the injury occurred under the original policy, the original insurer must respond to that later claim, despite the expiration of the policy period.

Another thing to consider is whether the insurer will indemnify or pay on behalf of the insured in a product liability incident. Normally, product liability insurance policies specify that they will pay on behalf of the insured. Manufacturers should be aware if their policy indemnifies for losses though, instead of paying on behalf, as that may have adverse impacts on the manufacturer.

In a product liability case, if there is a product recall, those costs will not be covered by product liability insurance. Product recall insurance is often offered separately, and can unexpectedly become necessary for the survival of a business.

Defense of the insured if suit is filed is extremely important; a 2012 study showed that the average jury award for product liability suits was $3,439,035.00. The cost to provide expert witnesses and the evaluation of thousands of company documents can easily amount to $100,000 or more.

Among other things, insurers that cover companies producing talc products should ensure the presence of appropriate label warnings. (Photo: iStock)

Among other things, insurers that cover companies producing talc products should ensure the presence of appropriate label warnings. (Photo: iStock)

Talc and product liability settlements 


For insurance purposes, a cosmetic talc claim is based upon injury that occurs over a long period of time. This is called a long-term physical injury case, and often several product liability insurers that have insured the company throughout history will have to step up to defend a company for this product liability issue.

For claims that involve long-term physical injury, the trigger of coverage determines what policy covers a long-term claim such as those revolving around talc exposure. An "occurrence" policy is triggered when bodily injury takes place during the policy period.

Several states use the "continuous trigger" theory, which implicates any policy covering the injured party from the date of first exposure until the manifestation for defense and indemnification.

Throughout history, states have generally imposed a continuous trigger theory for asbestos as the diseases that stem from asbestos exposure are progressive in nature. Since the alleged way that talc causes ovarian cancer is very different from the way that talc allegedly causes asbestos related illnesses, new trigger issues must be examined.

As we have seen in the J&J case, the science behind the claims will likely be questioned.

Loss allocation


Loss can be allocated in several ways if there are multiple triggered policies for any one given claim.

Some jurisdictions allow an insured to select a policy that has been triggered to fully defend and indemnify a given claim based on language found in some historical policies requiring an insurer to pay "all sums" on behalf of the insured. This allows the insured to choose the most favorable policy.

Other jurisdictions spread the cost of defense and indemnity across all triggered policies, which is called a pro-rata approach.

Some policies contain asbestos exclusions in their coverage, which could potentially pose a problem if the asbestos that is known to have existed in some forms of talc is somehow causing ovarian cancer in patients. In a case like this, the insured should be very aware of whether their losses are pro-rata or all sums, and how that affects which insurer will pay what sum.

While it is up to the judges and juries to decide the liability that large companies face in ovarian cancer talc claims, we can analyze the insurance risks.

Insurers that cover companies producing talc products should ensure the presence of appropriate label warnings, the inclusion of a safety warning notice about the product's potential risk, and the obvious listing of all product ingredients on the packaging.

Analysis brought to you by the experts at FC&S Online, the unquestioned authority on insurance coverage interpretation and analysis for the P&C industry. To find out more, visit www.nationalunderwriter.com/FCS.

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