Product Liability Insurance
Product LIABILITY Insurance
Product liability is a section of tort law that determines who may sue and who may be sued for damages when a defective product injures someone. Product Liability insurance protects a business from claims related to the manufacture or sale of products, food, medicines or other goods to the public. It covers the manufacturer's or seller's liability for losses or injuries to a buyer, user or bystander caused by a defect or malfunction of the product, and, in some instances, a defective design or a failure to warn.
There are generally three types of products "claims" a company may face:
Manufacturing or Production Flaws - A claim that some part of the production process created an unreasonably unsafe defect in the resulting product. Recent claims against Chinese manufacturers regarding the presence of dangerous chemicals in their products are an example of this type of claim.
No uniform federal law guides manufacturer’s liability, but under strict liability, the injured party can hold the manufacturer responsible for damages without the need to prove negligence or fault.
Design Defect - A claim that the design of the product is inherently unsafe. Is some flaw in the intentional design of a product that makes it unreasonably dangerous.
Strict liability may be imposed for an unreasonably dangerous design if the plaintiff can present evidence that there was a cost-effective alternative design that would have prevented the risk of injury.
Defective Warnings or Instructions - The claim that the product was not properly labeled or had insufficient warnings for the consumer to understand the risk.
The damages awarded in these claims include medical costs, compensatory damages, economic damages, and, in some instances, attorneys' fees, costs and punitive damages. Product liability claims can and do put businesses out of business
Commercial sellers, and retailers often times fail to secure this coverage. The logic is that, since they did not "manufacture" anything, the coverage is not necessary. However, manufacturers are not the only ones subject to product liability exposure, retailers and wholesalers are often brought into a lawsuit for alleged negligence by the consumer. Most states follow the "stream of commerce" model of liability. This means that if your company participated in placing the product into the "stream of commerce," it can be held liable for damages to the end user.
If your company provides any products to the consuming public, then your company needs product liability or completed-operations coverage. In most cases, some form of this coverage will be present in the standard commercial general liability or business owners' policy and is sometimes called products-completed operations insurance. You will need to confirm this with your insurance professional.
Get in touch with us today to answer any questions you may have regarding Product Liability Insurance.