|Rental stores can be included in the ‘chain of distribution’ for defective equipment. Any defect in a product that causes injury or damage to persons, property, rights or interests can give rise to a products liability claim. Such claims may be brought against any person or entity in the chain of product distribution, including rental companies, and some do not require a showing of fault or negligence. As a result, a rental company that rents a defective piece of equipment may find itself held liable for damages if the equipment proves defective, even if the rental company had no knowledge of the defect and was not otherwise at fault in any way. Products liability law is a major source of claims against rental operators, particularly those who make available inflatables and other amusements. Strict products liability law — a subset within the larger field of products liability law — is a particular concern because it substantially increases the burdens on not only manufacturers, but also every other party in the “chain of distribution” including the rental operator, often even though the rental operator had nothing to do with the manufacture of the equipment.If an inflatable is deemed unreasonably dangerous — whether in its design or in its manufacture, or even with regard to the warnings provided to users — any one or more of the parties in the chain of distribution might be found liable for a claimant’s injuries resulting from that danger, in some cases, specifically where a party acts as a manufacturer or assumes manufacturer-type liability by altering a piece of equipment, even if such parties are not shown to have been specifically at fault. If the manufacturer has gone out of business or cannot adequately compensate the accident victim(s), the other parties in the chain of distribution — including the rental company — might be called upon to do so, depending on the nature and extent of their respective roles in the process of manufacturing and distributing the equipment. In the last two decades, the growth of the inflatables industry has outpaced the ability to regulate its safety. Only a few states have begun to establish safety standards for inflatables and they are inconsistent from one state to the next. Without safety standards to follow, manufacturers may very well overlook inherent dangers in the design of their products. Further, it’s easier to prove and harder to defend an inherent danger when there are no safety standards against which to measure the efforts of the parties involved in manufacturing and distribution process to ensure the safety of those products.
In addition, in recent years, many inflatable manufacturers have entered the market only to go out of business shortly thereafter. Of those that survive, many are small companies with limited or no liability insurance or assets, so accidents involving their products mean the rental company and/or its insurer may be called upon to compensate claimants.
Also, though parents can settle claims on behalf of injured children, when the children become adults, they can often pursue additional compensation for the same injuries. Also not to be forgotten is the fact that injuries to children tend to call forth more vigorous responses, not only from within the courtroom, but also in legislative chambers as well as throughout the rest of society — a fact that may yield larger and more damaging judgments against those responsible for making available dangerous or potentially dangerous products.
Though methods of transferring or limiting liability may not be completely effective in every circumstance, because of the potential for large products liability and other similar claims connected with the rental of inflatables, rental companies are encouraged to:
James Waite, Winters & Waite, Centennial, Colo., is the author of “Business Management: Contracts and Legal Guidelines,” part of the American Rental Association (ARA) Rental Business Line series. An updated version of the guide including inflatable contract information will be available in November 2012. More information about contracts is available online at jameswaitelaw.com.