Product liability: tipping the scales against industry

Product liability in Canada is evolving, with increasing government intervention likely in 2025 and beyond. This shift is fueled by new legislation enabling governments to sue for recovery of health care costs associated with various products and services. This legislation generally removes traditional legal barriers to findings of liability, such as the requirement to prove causation, and provides formulas to dispense with time-consuming damages calculations and restricts limitation defences. Recent legislative initiatives indicate an appetite by governments to extend this type of legislation beyond tobacco and opioids, which were the subject of the first such statutes.

A more active regulatory environment will also lead to more consumer claims. For example, voluntary product recalls, in response to potential safety concerns, are providing fuel for class actions even in the absence of proven harm, as we wrote in 2023. Although the Ontario Court of Appeal rejected such a class proceeding in a recent decision, plaintiffs’ counsel are likely to retool and continue pursuing consumer claims after recalls.

Businesses must strengthen their compliance and communication strategies to navigate this changing landscape.

Government legal claims for health care cost recovery

Businesses in many sectors may find themselves defending legal actions brought by governments to recover health care costs linked to various products and activities across a wide range of industries. Provincial governments throughout Canada have enacted such “special purpose” legislation, which typically override statutory limitation periods and apply retroactively. This means companies could face litigation for business conducted decades ago and face exposure for years to come.

Businesses must strengthen their compliance and communication strategies to navigate this changing landscape.

The legislation also tips the playing field in favour of governments in many ways, including by establishing an evidentiary presumption that the product causes the physical and mental harms alleged and by creating formulas for determining damages based on market share. 

This legislative trend began decades ago with tobacco. Many provinces enacted special-purpose health care recovery statutes directed at recovering health care costs for tobacco-related harms. This trend then moved to opioids.

Government use of this legislative mechanism could now expand to other sectors. Potential future targets include businesses involved in social media, gambling, health and beauty, home goods, food and beverage, recreational and fitness products, and medical and pharmaceutical manufacturing and distribution, among others. As health care costs rise, governments are increasingly seeking to recover these expenses from industry participants.

A case study: British Columbia’s Bill 12

The most expansive effort to date was British Columbia’s proposed Bill 12, the Public Health Accountability and Cost Recovery Act. Although this bill was not passed before this year’s provincial election, its introduction signals a significant shift in risk for businesses in Canada. We wrote about this bill in more detail when it was first introduced.

Bill 12 was particularly noteworthy because it proposed to confer unprecedented litigation advantages on the government, allowing the government to sue for health care costs associated with a wide range of products and services, even if businesses complied with existing laws and regulations. The proposed legislation was broad enough to apply to virtually any product or service that was associated with physical or mental health risks. If enacted, the legislation would have allowed the government to prove its costs by using “Minister’s certificates” rather than by presenting evidence, a significant and unprecedented advantage.

Although the bill died on the order paper when the election was called, similar legislation is likely to resurface in some fashion.

Product recalls and increased litigation

In Canada, voluntary product recalls have become a focus for class action litigation.

Many Canadian plaintiffs have tried to hit “home runs” against businesses, seeking large damages awards. In many of these cases, plaintiffs have alleged both physical damages and psychological “shocks” attributable to recalls of products they have used.

A notable example is Palmer v. Teva Canada Limited, a recent class action relating to the worldwide recall of valsartan products. The plaintiffs’ claims included future increased risk of cancer, medical monitoring costs, refunds for consumed drugs, costs for discarded drugs, psychological damage and punitive damages. The Ontario Court of Appeal denied certification of the proposed class action, ruling that there was no viable cause of action in negligence without actual damage. This decision highlights the traditional challenges that consumer plaintiffs face in proving harm from product recalls. Osler acted for Teva Canada Limited in this action.

Although some defendants have succeeded in defeating some class actions involving recalls, plaintiffs’ counsel are likely to refine their strategies and pursue more focused claims. Accordingly, businesses need to be prepared for a new wave of litigation and be proactive in assessing the potential implications of recalling products.

Preparing for the future

Businesses should invest in comprehensive recall and communications strategies that align with their legal defences. They should also routinely conduct risk assessments, including evaluating vulnerabilities in products and supply chains. It is important to stay current regarding regulatory developments from Health Canada and other regulatory authorities.

Businesses should also build robust compliance and risk assessment programs, including tracking meaningful developments in the scientific, medical and business literature, as well as social commentary on potential harms linked to services and products. Companies should continue to invest in training programs to keep their teams informed.

Businesses should consider being proactive in regular and open communication with regulators and legislators. Engaging with policymakers demonstrates a commitment to being a good social citizen and may provide first-in-line access to proposed legislative and regulatory changes affecting products and compliance obligations.

Industry participants should have clear, comprehensive procedures to respond to product and supply chain issues. This includes procedures for escalating bad news and initiating recalls. Clear communication with the public is key. Well-developed communication strategies enable swift action to address potential risks. These strategies should align with proactive legal defense measures, such as up-front reimbursements and claims programs.

Finally, businesses should consider developing contingency plans for potential litigation. This includes establishing investigatory, communications and legal teams ready to respond to claims.

Litigation is coming for many sectors. Regardless of whether the plaintiff is a government, a regulator or a consumer, businesses that take proactive steps now will be better positioned to mitigate risks and manage the litigation when it arrives.