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Captive Insurance Considerations for Franchises

By Keith Langlands

The 1994 product liability lawsuit Stella Liebeck v. McDonald's Restaurants, P.T.S., Inc., and McDonald's International, Inc., is one of the most famous pieces of litigation of all time. It's also every franchisee's nightmare.

The facts of the case are well known. After ordering a cup of McDonald's coffee from one of the store's franchises, Stella Liebeck, 79, accidentally spilled the hot liquid on herself while sitting in the passenger seat of a parked car. The incident resulted in third-degree burns on 6% of her body, resulting in two years of medical treatment. She initially approached the franchisee for a settlement to help cover the costs of her medical treatment and lost wages, but the franchisee refused. The matter then snowballed into court and onto national television, resulting in a public relations snafu that has stuck with McDonald's and its franchises since that day.

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