Proposition 65: How are you exposed?

Imagine your company receiving a 60-Day Notice of Violation related to California Proposition 65. Are you familiar with this Proposition? The Notice alleges that one of your products contains lead and as a result of the sale of this product, exposures to lead have been occurring without clear and reasonable warnings on the product as required by Proposition 65.  The Notice also contends that California residents, through the act of buying, acquiring or utilizing the product are exposed to the lead in this particular product.

According to the Notice, this particular product was purchased via a major retailer.  The lawyers trace the product to you as the distributor (a US domiciled company) who had the products manufactured in China.

A little bit of history as this is not something new. “In 1986, California voters approved an initiative to address their growing concerns about exposure to toxic chemicals. That initiative became the Safe Drinking Water and Toxic Enforcement Act of 1986, better known by its original name of Proposition 65. Proposition 65 requires the State to publish a list of chemicals known to cause cancer or birth defects or other reproductive harm. This list, which must be updated at least once a year, has grown to include approximately 800 chemicals since it was first published in 1987.”

What really becomes a problem for companies is that once the process begins – a notice filed (by a consumer advocate) and later a lawsuit – it becomes a hidden cost you didn’t anticipate. What I mean is, there will be no insurance coverage to offset legal representation, fines and penalties that will be assessed as a result of violating Proposition 65. And don’t forget the internal cost of changing your internal operations. Settlements can range from $5,000 to $700,000 ….view here the various settlements of 2012.

Risk management tip – if you are doing business in California, review the chemical ingredients going into products being manufactured, distributed and sold to determine if there are any that may be on the Proposition 65 list. Review contracts with suppliers of goods/ingredients being sold to determine how the transfer of risk issues may or may not be addressed in this regard.

Don’t think you are immune, Pepsi seems to be in exactly this situation… “Study Found that Pepsi Contains Potentially High Levels of a Reported Carcinogen”