Anticipating Challenges to Product Warranties
How to plan for a challenge to a product warranty
March 4, 2020
From the standpoint of manufacturers of windows and doors, few documents receive the level of analysis and critical input as a product warranty. The warranty is a deliberate statement of a commitment to evaluate an unwanted condition that manifests in-service and that may be from a problem with material or workmanship.
Even with all this intelligent attention, the more difficult work is to develop and operate a program that effectively implements the warranty as intended. That is, to provide service as promised but decline repeated demands to give more than promised, without extraordinary circumstances.
Often, warranty limitations appear to be disregarded in claims asserted within a construction defect lawsuit. In our view, a manufacturer’s inclusion in a lawsuit over alleged construction defects should not routinely be treated as an “extraordinary circumstance.” Doing so would abandon the fair limitations stated in the relevant product warranty. Rather, it is important to identify a strategy that will best present an argument for enforcement of those limitations, when needed most.
Undoubtedly, such lawsuits will assert claims and seek damages that are beyond the commitment within the product warranty. The strategy for enforcing the warranty limitations in litigation must be established under the applicable facts and law.
It seems the volume of parties—each with multiple claims and cross claims among them—tends to obscure the immediate need to understand the extent to which a warranty may serve as a shield and a sword. Unless a manufacturer pushes, it may not happen.
Manufacturers especially need to know early if and how their warranty can be used to dismiss the common claims seeking compensation for direct or indirect consequential damages. Although definitions relating to “consequential damages” can vary by jurisdiction, in general, they are losses that, by their nature, go beyond remediation or repair of the window or door itself.
These can range from resurfacing finishes due to water penetration at a window or door opening to re-allocation costs incurred because of alleged “uninhabitability of living space” as a result of perceived damage or its repair.
Where does it stop? It is disconcerting (scary) to be at the whim of a claimant prone to push for dollar compensation for every theoretical inconvenience that could occur. These risks are real and represent the reason that the product warranty includes limitations on the manufacturer’s liability.
It is important to use the tools that we have. The law in the U.S. allows for a manufacturer to disclaim liability for most consequential damages, particularly when that manufacturer is transparent regarding the warranty and makes a good effort to communicate it downstream with the product. This limitation can also affect claims that are not warranty-based—a warranty is a creature of contract that, under the right circumstances, will override the common “tort-based” claims, classically based upon the tort of negligence.
Undeniably, the longer claims that seek damage beyond the warranty remain asserted against a company, the bigger “life” they acquire.
At the inevitable mediation(s), the parties and mediator wrangle over allocation of claimed dollars and rarely over legal “potential” defenses. Still, those that take action to enforce the warranty terms can inject uncertainty into their opponent(s) where none existed before.
Simple message: stick with the plan and don’t give up on the terms of the product warranty because litigation has been filed. Rather, require an evaluation of the case that includes a plan of action regarding affirmative use of the warranty.