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In legal disputes regarding product liability, a risk-utility test is used to determine whether a product's design or warning is defective, thereby making the manufacturer liable for injuries caused by its product.
The manufacturer is held liable under the risk-utility test if the probability of injury times the gravity of injury under the current product design is more than the cost of an alternative reasonable design plus the diminished utility resulting from modifying the design. More simply, the court considers if the economic costs (determined from likely lawsuits) are higher than the cost of changing the product design (ex: installing a plastic guard) plus the loss of use of the product (ex: the new guard makes it harder to use the product). Generally, the simplest way to think of the risk-utility test is the Hand Formula applied to products.
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