Support The Innocent Sellers Act

March 17, 2017 Bob Heidenreich

You may have on LBMJournal.com recently that the National Lumber and Building Material Dealers Association (NLBMDA) has urged LBM dealers to contact their congressional representatives to request support for Rep. Blake Farenthold (R-TX) in the introduction of the Innocent Sellers Fairness Act.

The bill has been introduced as a means to protect independent lumber and building material dealers from defects and failures in manufacturers’ products.

“Dealers should not be forced to fight a product liability lawsuit, or worse agree to a settlement… “

As NLBMDA President Jonathan Paine said, “Dealers should not be forced to fight a product liability lawsuit, or worse agree to a settlement, when the failure or damage was caused without their knowledge or control.” I couldn’t agree more. Like a number of other dealers, I’m speaking from experience.

On more than one occasion as a deck builder and building materials dealer, I have been forced to defend myself in court because a manufacturer’s product failed. Particularly when composites first came out, they were a new product and some of them failed. Some of the manufacturers of those products subsequently went out of business.

I found myself in situations in which the manufacturing company had folded and the warranties were no longer valid. There was no one left to cover the homeowner’s damages but myself as the retailer, and in some cases, builder. My store would be named in court documents and of course we’d lose every time. We’d have to pay to replace decks in which the failure was not related in any way to installation or anything we did other than, in one judge’s words, “conveyed the warranty by selling the product.”

It was a real issue for me because, even though I was prepared and had insurance to cover such a situation, I then had to pay higher premium costs as well as cover the costs that insurance didn’t when replacing the decks.

When a product fails and the retailer or wholesaler can be held responsible, it is particularly hard on small businesses. According to an article I read recently, 80% of these claims are against small, independent businesses.

Here’s another specific example from my own experience: We built this beautiful deck, but the composite material eventually nearly disintegrated into nothing. The consumer protection agency actually issued a recall, builders were warned to take those decks out of service, the process went through the court system, and there was a class action lawsuit. The manufacturer had to pay pennies on the dollar to cover some of these claims, but prior to that, we were served with lawsuits on probably six occasions and it cost me in the range of $300,000 in replacement costs.

Even though my insurance covered most of it, the cost in time and damage in lost customers and the good reputation of my business could have been very difficult to recover from. I was fortunate that I was able to get through it and had some help from the manufacturer in the initial stages, and I was able to work with the homeowners to keep them satisfied throughout the replacement process so that my business’s reputation could withstand the lawsuits.

What can a retailer or wholesaler do to protect himself against something like this? The best answer is to urge your representative to support legislation like the Innocent Seller’s Act.

NLBMDA has done a great job lobbying for this legislation. If you are looking for more information on the bill, or an easy way to access information to let your own local representatives know about the bill, visit NLBMDA’s site at dealer.org.

Another thing a dealer can do is to be sure you have conversations with your insurance agent about product liability. An insurance company can provide the legal representation and preparation and settlement, but that’s not free to anyone. You’re put in a defensive position, and it will cost you money, but it is best to be prepared and have a plan in place with your insurance company. Have a plan in advance just like anything else you do in business. It’s okay to plan for something negative and hope it doesn’t happen. That’s called being prepared.

Another thing a dealer can do is to stock products from reputable manufacturers. Don’t always be trying to sell the latest fresh-on-the-market product from an unproven manufacturer. You don’t know when those will go away. Stick with the big names that already have a reputation in the industry.

I’m certainly no lawyer and not qualified to give legal advice, but let’s face it: It’s a time to have a really good discussion with your insurance agent as well as contact your representative in Congress.

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