COVID Crisis Brings Opportunity and Risk for Medical Product Manufacturers - Product Liability Considerations

27 avril 2020

In response to the unprecedented demand and urgent need for products to limit the spread and effect of the novel coronavirus (COVID-19), the Government of Canada announced a call to action to Canadian manufacturers and businesses to assist Canada in producing much needed medical supplies.

It is important to note that, unlike its southerly neighbour, Canada and its provinces have not enacted legislation to provide blanket liability protections to companies and individuals working to respond to COVID-19. The only acts that are subject to protection are those mandated or authorized by the government under the applicable legislation.

This bulletin will provide a summary of the regulatory relief provided to medical supply manufacturers by Health Canada to April 14, 2020. It will also highlight ongoing product liability obligations and enhanced legislative product liability protections being provided to manufacturers in the US and other jurisdictions.



Interim product regulatory relief in Canada

As part of the call to action, on March 18, 2020, Health Canada announced that it had taken various measures to facilitate access to hand sanitizers, disinfectants and some personal protective equipment, such as masks, gowns and swabs. On an interim basis, Health Canada will:

  • Relax certain regulatory requirements for products that are not fully compliant with Health Canada requirements, such as bilingual labelling
  • Permit some products that are not authorized for sale in Canada, but are authorized or registered in other jurisdictions with similar regulatory frameworks and quality assurance as would be required in Canada
  • Expedite approvals of certain products, as well as establishment and site licences for the manufacturing, packaging, labelling and importing of health products (e.g. sanitizers and disinfectants)

Health Canada continues to impose regulatory requirements to protect the health and safety of Canadians, and those intending to supply such products should consider the following:

  • Authorizations to conduct activities such as manufacture hand sanitizers or import medical devices related to COVID-19 (including masks and gowns) will be granted based on an attestation to regulatory requirements. While certain regulatory requirements may be waived during the interim period, appropriate controls must be in place including processes to prevent contamination, ensure products meet specifications and are suitable for sale
  • Requests to import or manufacture medical devices, and notifications to import hand sanitizers and disinfectants that may not fully meet current regulatory requirements must be submitted to Health Canada
  • Certain regulatory requirements continue to apply including maintaining records to facilitate a product recall and reporting of adverse events

Legislative protection against product liability: Canada and around the world

USA

The United States has uniquely enacted legislation to provide some liability protection to companies and individuals working to provide products and services to support the response to COVID-19.

The Public Readiness and Emergency Preparedness Act (PREP Act) was enacted in 2005 and authorizes the Secretary of Health and Human Service to issue a “PREP Act Declaration” that provides immunity for claims for death, injury, damage to property or business losses brought against any entity or individual covered by a PREP Act Declaration. On March 10, 2020, the Department of Health and Human Services noted that the spread of COVID-19 constituted a public health emergency and issued a PREP Act Declaration effective as of February 4, 2020.

The PREP Act Declaration provides liability immunity to certain individuals and entities (for example, manufacturers, distributors and health care professionals) against any claim of loss caused by, arising out of, relating to, or resulting from the manufacture, distribution, administration, or use of medical countermeasures to  treat, diagnose, cure, prevent or mitigate COVID-19. The declaration would not protect against claims involving “willful misconduct”.

The declaration’s protections will be in place until October 1, 2024.  

Canada

Unlike the United States, Canada has not enacted federal legislation to provide liability protections to companies and individuals working to respond to COVID-19.

The Canadian government has yet to invoke the federal Emergencies Act, which could provide some legislative protection against product liability for medical supply manufacturers. In particular, the Emergencies Act provides that no action or proceedings shall be instituted against any person providing services in good faith under the Emergencies Act.

The Emergencies Act was passed in 1988 as a replacement for the War Measures Act. It has never been used. The Emergencies Act grants Cabinet the ability to assume jurisdiction from the provinces in areas like health care and commerce. It could allow the federal government to:

  • Requisition, use or dispose of property
  • Direct any person to render essential services that they are qualified to provide
  • Regulate the distribution and availability of essential goods, services and resources

The Emergencies Act would provide some liability protection to individuals and companies providing services pursuant to an order or regulation made under the Emergencies Act.

Although the Government of Canada has streamlined approvals of products, establishment and site licences related to medical supplies, it has not invoked the Emergencies Act and, as a result, has not  extended product liability immunity or protection in relation to the manufacturing, testing and use of certain drugs, biological products or medical devices. Some of the provinces have enacted emergency legislation in response to the COVID-19 pandemic that could provide some limited legislative protection against liability.

Ontario

The Government of Ontario has triggered its powers under the Emergency Management and Civil Protection Act (EMCPA).

Under the EMCPA, the Government of Ontario may, among other things:

  • To prevent, respond to or alleviate the effects of the emergency, constructing works, restoring necessary facilities and appropriating, using, destroying, removing or disposing of property
  • Using any necessary goods, services and resources within any part of Ontario, distributing, and making available necessary goods, services and resources and establishing centres for their distribution
  • Procuring necessary goods, services and resources
  • Fixing prices for necessary goods, services and resources and prohibiting charging unconscionable prices in respect of necessary goods, services and resources
  • Authorizing, but not requiring, any person, or any person of a class of persons, to render services of a type that that person, or a person of that class, is reasonably qualified to provide

Importantly, individuals acting pursuant to an order made under the EMPCA have certain protections against liability. We are not aware of any such order being made under this legislation which would extend product liability immunity or protections to manufacturers.

Although the Government of Ontario has made a number of orders (for example, the closure of establishments, suspension of limitation periods, and closure of places of non-essential business), so far there has not been any Ontario orders under the EMCPA mandating the procurement of any goods, services or resources and providing liability protection under the EMPCA.

British Columbia

On March 18, 2020, the British Columbia Minister of Public Safety and Solicitor General declared a provincial “state of emergency” under the Emergency Program Act.

Under the Emergency Program Act, British Columbia may, among other things:

  • Acquire or use any land or property considered necessary to prevent, respond to or alleviate the effects of an emergency
  • Authorize or require any person to render assistance of a type that the person is qualified to provide or that otherwise is or may be required to prevent, respond to or alleviate the effects of an emergency or disaster
  • Procure, fix prices for or ration food, clothing, fuel, equipment, medical supplies or other essential supplies and the use of any property, services, resources or equipment within any part of British Columbia for the duration of the state of emergency

Similar to Ontario, under the Emergency Program Act individuals will not be liable for any damage or injury from the person doing or omitting to do any act that the person was appointed, authorized or required to do, unless the person was grossly negligent.

It is important to note, that only appointed, authorized or persons required to do something under the Emergency Program Act have certain protections against liability. We are not aware of any such orders being made under this legislation to extend product liability immunity or protections to manufacturers.

Additionally, on April 2, 2020, the Minister of Public Safety and Solicitor General went the furthest of any of the provinces. The Minister issued an Order under the Emergency Program Act to protect persons who provide or operate essential services from being held liable for damages resulting, directly or indirectly, from an individual being or likely being exposed to COVID-19, unless the person was grossly negligent.

Alberta

On March 17, 2020, the government of Alberta declared a state of public health emergency, pursuant to the Public Health Act, that will last at least 90 days unless repealed earlier.

Under section 52.6(1) of the Public Health Act, during the state of public health emergency the Minister or regional health authority may, among other things:

  • Acquire or use any real or personal property
  • Authorize or require any qualified person to render aid of a type the person is qualified to provide
  • Provide for the distribution of essential health and medical supplies and provide, maintain and co-ordinate the delivery of health services.

Under the Public Health Act, there will be no liability for those acting in good faith and related to the public health emergency under the direction of the Crown or medical officers of health.

Saskatchewan

Saskatchewan declared a provincial statement of emergency on March 18, 2020, under The Emergency Planning Act, giving the government broad powers to address the COVID-19 pandemic.

For the duration of the state of emergency, the minister may:

  • Acquire or utilize any real or personal property that the minister considers necessary to prevent, combat or alleviate the effects of an emergency
  • Authorize any qualified person to render aid of a type that the person is qualified to provide
  • Provide, maintain and co-ordinate emergency medical, welfare and other essential services in any part of Saskatchewan
  • Procure or fix prices for food, clothing, fuel, equipment, medical supplies or other essential supplies and the use of any property, services, resources or equipment within any part of Saskatchewan for the duration of the state of emergency

The Emergency Planning Act also provides protection from liability with respect to damage caused through any actions taken in good faith by individuals who are appointed and carry out measures relating to the emergency, unless they are grossly negligent.

Manitoba

The Emergency Measures Act was used to declare a state of emergency in Manitoba on March 20, 2020. The state of emergency allows the minister or a local authority to, among other things: (a) utilize any real or personal property considered necessary to prevent, combat or alleviate the effects of any emergency or disaster; (b) authorize the procurement and regulate the distribution and availability of essential resources and the provision of essential services; and (c) provide for the restoration of essential facilities, the distribution of essential supplies and the maintenance and co-ordination of emergency medical, social and other essential services.

The Emergency Measures Act also provides protection from liability for any person acting under the authority of the Emergency Measures Act, for anything done, or not done, or for any neglect in the performance or intended performance of a duty of in the exercise of a power, unless the person was acting in bad faith.

The Atlantic Provinces

Local and provincial states of emergency have also been declared in Newfoundland, Prince Edward Island, New Brunswick and Nova Scotia.

Each of the respective provincial acts, under which the public health emergency or state of emergency was declared, contain similar provision limiting liability for those acting under the orders or directions of the government or health officials in responding to the pandemic.

In particular, in Newfoundland, under section 55 of the Public Health Protection and Promotion Act there is protection from personal liability for anything done in the good faith exercise or performance, or intended exercise or performance, of a power, duty or function conferred or imposed upon him or her by this Act or its regulations.

There is also immunity in Prince Edward Island under the Public Health Act in the performance of a duty or the exercise of power conferred or imposed by the Public Health Act, unless the person was acting in bad faith.

Under the New Brunswick Emergency Measures Act, a person is not liable for any damage arising out of any action taken under this Act or the regulations, and is not subject to any proceedings by way of judicial review or injunction with respect to any action taken under this Act or the regulations.

Finally, in Nova Scotia, the Emergency Management Act provides that there is no liability for any damage arising out of any action taken pursuant to the Emergency Management Act. Similar to New Brunswick, that person is also not subject to any injunction with respect to any action taken pursuant to the Emergency Measures Act or its regulations.

Other product liability considerations

In addition to complying with ever-changing regulatory requirements, those intending to manufacture products to combat the COVID crisis must still meet the requisite duty of care owed to consumers and take proper precautions including:

  • Ensuring that each product is designed to be reasonably safe for its intended purposes
  • Ensuring there are no defects in the manufacture process that would give rise to injury in the ordinary course of use. This would include employing appropriate screening and quality assurance processes, even in this high-pressure and time-sensitive environment
  • Warning consumers of risks inherent in the use of the product for which it has knowledge or ought to have knowledge. This would include ensuring end users are being provided with accurate and fulsome information about a products intended use. Companies should be transparent about product limitations

A duty to take care that is “reasonable in the circumstances” is also owed by others in the supply chain, including suppliers, component manufacturers, testing laboratories, distributors and sellers.

Manufacturers should also take steps to minimize their risk, for example by ensuring sufficient insurance  to address future litigation or supply chain issues. Particular care should be paid to specific coverage limits and any exclusions that may be engaged by the product at issue. Manufacturers can also negotiate liability protection or indemnities into supply or sale agreements.

Conclusion

Manufacturers should be aware of their legal responsibilities even when manufacturing in response to pandemic circumstances. In heeding the call to help, manufacturers should take into consideration the absence of immunity or special protections and take proactive steps to reduce risk in their operations and commercial arrangements.

Gowling WLG will continue to monitor upcoming directives and legislative and regulatory changes with respect to the production and supply of products that will help in the fight against COVID-19. The information in this article is an overview of the recent developments in the regulations relating to product liability in Canada. If you have any questions about how these recent changes may affect your business we invite you to contact a member of Gowling WLG's Product Liability group.


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