Warranty coverage: Avoiding self-inflicted wounds

Sept. 27, 2007
Recently, a national appliance company found itself in hot water because the specific language of the warranty it provided on a consumer product had unintentional coverage for the consumer.

Tamara L. Karel

The company manufactures consumer and industrial versions of its products and warrants them accordingly. While the average consumer uses the product once per week, the company designed it to be used a maximum of once daily. The industrial product can withstand up to 20 operations per day, and under harsher conditions.

In this particular instance, a customer purchased the consumer version of the product and received the appropriate two-year warranty. However, the consumer used the product more than three times daily and in an industrial-like setting, a hybrid home/shop. The excessive use and inappropriate environment caused a motor malfunction and extensive damage to the entire product. When the company refused to honor the warranty because of the inappropriate usage, the consumer sued.

The appliance company argued in court that the manner in which the plaintiff used the product went far beyond what it considered normal consumer usage, and therefore the warranty did not cover the damage. The company further argued that the plaintiff, knowing the extensive use the product would see, should have purchased the industrial version, which would have been able to withstand the excessive use. The court disagreed. It determined that the language of the warranty provided full coverage for the product for the entire two-year warranty period, regardless of the extent or manner of use by the plaintiff. The court awarded the plaintiff damages for the product and for the company’s wrongful denial of the warranty.

Even though the warranty excluded “excessive usage,” it did not define what usage was appropriate and under what circumstances the product could or should have been used. To avoid this pitfall in the future, the company has now revised its warranties and has narrowly tailored the language of the exclusions, specifically defining “excessive usage” and appropriately defining the end user.

In the industrial arena, a construction company successfully challenged the wording of the exclusion provisions in a truck manufacturer’s warranty. The construction company fully recovered the amount of damages to its commercial truck when the power take off supplied by the truck manufacturer was insufficient to handle the aftermarket construction equipment that was added to the truck. There, the wording of the warranty exclusion for “aftermarket equipment” was vague and ambiguous, such that the ambiguity was construed against the truck manufacturer. As with the appliance company, the truck manufacturer would have benefited from more precise wording in its standard warranty.

The message here is, take the time now to review your warranties for any vague or ambiguous terms which may create unintended coverage. It may save you down the road.

Tamara L. Karel, Esq. is with the business law firm Benesch, Friedlander, Coplan & Aronoff LLP, Cleveland, Ohio. Got a question about safety? E-mail it to us at [email protected]. Safety by Design

Edited by Lawrence Kren

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