Understanding Your Product Liability

Product liability insurance can help protect your business when you are manufacturing a product to ship internationally.

Many businesses that import into the United States have a hard time keeping up with the amount of risk they take on throughout that process. In addition to the risk of importing, there is also the added risk that product or commodity may pose once it is in the hands of the end consumer. That is way it is so important for a business owner to be familiar with the different insurance policies that can help them protect their business and stabilize their bottom line.

One important type of insurance for companies that manufacture physical products is product liability.

What is Product Liability?

Product Liability refers to the responsibility manufacturers, distributors, suppliers, retailers, and others who make products available to the public have for the injuries those products cause. In this instance the word “product” is traditionally limited to products in the form of tangible personal property. However, the word “product” can have broader connotations.

The United States was the birthplace of modern product liability law during the 20th century and the U.S. continues to be the global leader in cases. According to Mathias Reimann in Comparative Tort Law: Global Perspectives:

“In the United States, product liability continues to play a big role: litigation is much more frequent there than anywhere else in the world, awards are higher, and publicity is significant.”

The physical harm or damage caused by the product can be the result of the following:

• Design flaws
• Product defects
• Inadequate instructions, labels and warnings

The Importance of Having Product Liability Insurance

In a world of uncertainties, there is one fact we do know for certain: that in this litigious society, companies cannot escape being sued. And since a business is always vulnerable to a lawsuit, the only way to be protected is to have an insurance policy in place that is specifically suited to handle the situation.

A product liability lawsuit can be very expensive and time consuming for a business. If that business did not take the proper precautions during the manufacturing phase, the product could have an unforeseen fallibility that causes a user harm. When these cases go to court, it is typically up to the consumer to prove how a design change would have kept them safe while it is up to the company to prove that their original design was infallible.

For large corporations with an on staff legal team, these lawsuits may be easier to defend against. However, if you are a small to medium sized company, a single lawsuit can have a drastic financial effect on your company.

Who Needs Product Liability Insurance?

While is is not legally required for a business to have product liability insurance, a business that does any of the following product-related activities should consider purchasing it to ensure they are protected:

• Manufacturing
• Distributing
• Wholesaling
• Importing
• Retailing
• Installing
• Repairing/modifying

What Does Product Liability Insurance Cover?

A product liability insurance policy would typically help with the following costs associated with an injury or property damage claim:

• Your legal fees
• Settlements and court-ordered judgments paid to the injured party
• Medical bills of the injured party

Need to secure product liability insurance? Talk to a TRG Risk Advisor to assess and reduce your company’s level of risk.