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Changing Trend: Risk-Utility May No Longer Be The Favored Test for Design Defect Claims

In the world of products liability, design defect claims arise when the product is inherently dangerous in its design. The test for whether a product is inherently dangerous has evolved in modern years from the “consumer expectations test” to the “risk-utility test.”

Under the traditional consumer expectations test, the seller of a product is liable if the product is in a defective condition such that it renders the product unreasonably dangerous to the consumer. This standard allows a jury to infer the existence of a defect if the product fails to meet reasonable expectations of consumers.

The risk-utility analysis on the other hand, allows the fact finder to consider consumer expectations in the risk-utility balancing, but the Third Restatement makes clear that “consumer expectations do not play a determinative role in determining defectiveness.”  Restatement (Third) of Torts: Prod. Liab. § 2 (1998), comment g.  Additionally, the risk-utility analysis typically requires plaintiff to put on proof of a feasible alternative design. Id. at (b).

The modern tend by state supreme courts has been to adopt some form of the risk-utility analysis.  See Branham v. Ford Motor Co., 390 S.C. 203, n. 11, 701 S.E.2d 5, n. 11 (S.C. 2010) (“By our count 35 of the 46 states that recognize strict products liability utilize some form of risk-utility analysis in their approach to determine whether a product is defectively designed.”). Despite this overwhelming trend, three states (Florida, South Dakota, and Nevada) have recently declined to adopt the risk-utility analysis, suggesting a change in the modern trend.

Florida:

In Aubin v. Union Carbide Corp., 177 So. 3d 489 (Fla. 2015), an asbestos/mesothelioma case, the Florida Supreme Court addressed whether, inter alia,  the lower appellate court erred in applying the Third Restatement, i.e. the risk-utility test.  The Florida Supreme Court first noted that applying the Third Restatement conflicted with prior Florida case law that utilized the consumer expectations test instead of the risk utility test.  The court further noted that the consumer expectations test “best vindicates the purposes underlying the doctrine of strict liability” and “emphasized[d] that the Restatement is not a uniform code that is promulgated to harmonize the law throughout the states.”

In considering whether to adopt the Third Restatement’s approach to design defect claims, the court carefully examined the risk-utility analysis and discussed other state supreme court opinions that have addressed the same question. Ultimately the Florida Supreme Court rejected the risk-utility test:

[We] are in accord with those state supreme courts that have thoughtfully considered this issue and determined that the Third Restatement’s new approach is inconsistent with the rationale behind the adoption of strict products liability.  The Third Restatement is, in fact, contrary to this state’s prior precedent. . . Thus, in approaching design defect claims, we adhere to the consumer expectations test, as set forth in the Second Restatement, and reject categorical adoption of the Third Restatement and its reasonable alternative design requirement.

South Dakota

The South Dakota Supreme Court has never made clear whether the state follows the risk-utility analysis or consumer expectations test.  See Robinson v. S.D. Brandtjen & Kluge, Inc., 500 F.3d 691, 698 n.2 (8th Cir. 2007) (“It is unclear whether South Dakota has adopted, or would adopt, the so-called “risk-utility test,” in addition to the consumer expectations test[.]”).  Recently, in Karst v. Shur-Co., 878 N.W.2d 604 (S.D. 2016) the South Dakota Supreme Court declined the opportunity to clarify its position on the correct test for design defect claims.  The issue before the court whether a jury instruction on design defect claims correctly stated South Dakota design defect law.  The court seemed to dance around the issue of whether South Dakota follows the risk-utility analysis or consumer expectations test and avoided addressing the issue head-on.  One justice dissented in part, criticizing the majority for declining to take the opportunity to adopt the risk-utility analysis:

After noting the confusion surrounding South Dakota precedent on the proper test for defect design cases, the dissent noted: “we should take this opportunity to consider the current state of our products liability jurisprudence.  It is clear from the arguments of counsel that our sole reliance on the outdated principles contained in the [Second Restatement] is no longer workable.  What is not so clear is where, precisely, South Dakota stands on formally adopting the risk-utility test as the exclusive test to be used in strict products-liability claims. (citations omitted) . . . Because the majority opinion has declined to adopt the risk-utility test as set forth in the [Third Restatement] as its exclusive test in strict products-liability claims for design defect, this discussion must wait for another day.”

The majority opinion noted the dissent’s criticism and the lack of clarity with regard to South Dakota law on design defect claims, but concluded that the issue was not germane to the present appeal:

The dissent argues that we should adopt the risk-utility balancing test from the [Third Restatement].  Alternatively, the dissent argues we should overrule [prior precedent] to the extent it may be interpreted to prohibit giving both the risk-utility and consumer-expectations tests.  The dissent finally suggests that another ‘feasible option’ may be adopting the modified consumer-expectation test set forth in Potter v. Chicago Pneumatic Tool Co., 241 Conn. 199, 694 A.2d 1319, 1330-35 (1997).  We agree that [South Dakota prior precedent] – unqualifiedly indicating that the risk-utility and consumer-expectation tests are alternative rather than cumulative requirements for proving a product is in a defective condition unreasonably dangerous – should be revisited.  But that language is not germane to [the present appeal]. . . . More importantly, no party has argued for the dissent’s various suggestions.  Without the benefit of briefing and argument, we must wait for an appropriate case to consider such significant changes in our products-liability jurisprudence.

Nevada:

Most recently, the Nevada Supreme Court in Ford Motor Co. v. Trejo, 402 P.3d 649 (Nev. 2017) rejected the risk-utility analysis in favor of the consumer expectations test.  The court began its analysis by examining Nevada products liability law, going back as far as 1966, which had “long used” the consumer expectation test.  On appeal, Ford argued for the Nevada Supreme Court to “depart from this well-settled line of jurisprudence and adopt the risk-utility test[.]”  The court analyzed the perceived benefits of the risk-utility test, but ultimately concluded “that the proposed advantages of the risk-utility test over the consumer-expectations test are largely overstated.”  The court also found that the risk-utility test “stands contrary to the public policy supporting Nevada’s long-standing use of the consumer-expectation test.”  The court continued by noting that “[with] respect to the clarity of consumer-expectations, we conclude that even in cases of complex or technical products, a lay jury is sufficiently equipped to determine whether a product performs in a manner to be reasonably expected under certain circumstances, pursuant to the consumer-expectation test.”

The Nevada Supreme Court then discussed the “tangible disadvantages” of the risk-utility approach, including, inter alia, (i) that the risk-utility test subverts the analysis of whether a seller used reasonably care by focusing on the “‘foreseeable risks of harm’ apparent to a manufacturer when adopting a design . . . , [which] inserts a negligence standard into an area of law where this court has intentionally departed from traditional negligence analysis;” (ii) that “the Third Restatement fails to consider the crucial link between a manufacturer establishing the reasonable expectations of a product that in turn cause consumers to demand that product.” (citing Aubin, 177 So. 3d at 507); and (iii) that by “requiring plaintiffs to demonstrate proof of a reasonable alternative design, the risk-utility approach actually imposes a higher bar for recovery than that in a case involving standard negligence claims.”

After discussing and thoroughly analyzing whether to adopt the risk-utility analysis, the Nevada Supreme Court concluded that “Nevada will continue to be governed by the consumer-expectation test.

Conclusion

Although the modern trend for state high courts had been adoption of the Third Restatement/risk-utility analysis for design defect claims, the recent state supreme court opinions in Florida, South Dakota, and Nevada could signal a significant change in this trend away from risk-utility, back toward the traditional consumer expectations test.