What Product Liability Insurance Covers
Only damages caused by specific factors are covered. These include:
- Design defects. Theres something wrong with the products design.
- Manufacturing defects. Something went wrong during manufacturing.
- . A mistake in marketing materials, like improper labels.
- Improper warning. The product doesnt include sufficient warnings about potential harm.
- Strict liability. The product harms the customer, even if youre not at fault or it wasnt your intention.
How Do You Buy Product Liability Insurance
Insurance companies usually include product liability insurance with a general liability policy. This is typically called products-completed operations coverage. Products refers to the items you make or sell. Completed operations refers to completed work.
But some retailers or manufacturers may need to buy this coverage outside of their general liability policy.
Check with your agent to make sure your general liability policy includes this coverage. When you purchase a policy, youll get a certificate of liability insurance as proof of insurance.
What Is The Difference Between Public Liability And Product Liability
Public liability insurance protects your company against third-party bodily injury and property damage claims and lawsuits filed by members of the public. PLI is more common in the United Kingdom and Australia, and the protections this insurance type offers are similar to a general liability insurance policy in the U.S. However, public liability insurance typically does not include coverage for product liability and only covers third-party bodily injury and property damage that occurs on your business premises.
You May Like: Root Canal Without Insurance Cost
Damages From Wrongful Death
With respect to a lawsuit for wrongful death, someone could sue for three types of damage:
- Economic damages: A family member of the deceased could sue for the loss of financial security .
- Noneconomic damages: A surviving spouse or child could sue for pain and suffering, emotional distress, and missed future enjoyments due to the wrongful death of the spouse or parent.
- Punitive damages: A court can impose punitive damages if they believe the manufacturer or other party being sued was reckless in its actions or failure to act.
Why Is Product Liability Insurance Important
If your business sells any goods or products to the general public, it is absolutely necessary for you to consider Product Liability Insurance. There is no guarantee that any of your products will not cause injury, property damage, or even wrongful death. Even if you are certain of the quality of your products, a dissatisfied customer may very well be able to wage a long and expensive legal battle against you and your company that may deplete you of your time, money, and resourceseven if you were to win the case. It is important to note that product liability cases are among the most expensive to litigate.
Product Liability Insurance makes sense to consider for any financially responsible business owner. While there are a number of steps you can take as a business to reduce your risk exposure, when you put your products in the hands of your customers, you never know what may happen. Product Liability Insurance gives you peace of mind that if anything were to occur, you would have a formidable safety net to fall back upon.
Some examples of small businesses that could use Product Liability Insurance are:
- Beauty or fragrance sellers
- Restaurants, bakeries, cafes, or specialty food stores
Recommended Reading: Average Car Insurance Cost Michigan
Factors That Affect Cost
These factors may affect the cost of your product liability insurance:
- Coverage limits: Higher coverage limits expose the insurance company to potentially higher-cost lawsuits, so the costs of the insurance premiums also increase.
- Industries: Some industries face higher standards and incur more lawsuits than other industries, which means that businesses in those industries pay higher product liability insurance premiums.
- Location: Insurance providers price product liability insurance according to state insurance regulations and typical loss exposures in those states.
- Revenue: A businesss revenue typically determines the overall liability lawsuit exposure that it can face, which will affect how much the courts award in lawsuits.
- Claim history: Businesses or products that have a claim history have a higher risk of potential lawsuits for the insurance provider, which will increase the costs of the insurance.
Tip: To get a rough estimate of what your product liability insurance might cost, use this formula: 0.25 x ÷ $100.
Do I Need Product Liability Insurance In The Uk
You dont need to manufacture a product in order to require product liability. Importing and repairing in some cases is enough to make you liable. Below we look at some of the situations were a business might need product liability insurance.
- If you manufacture a product
- If you commission the manufacture of a product and/or your business name appears on the product
- You use material or components from a supplier/producer who is no longer in business or is un-identified
- You use materials/components or important goods from outside the European Union
- If you have a hold harmless agreement in place with any supplier which indemnifies their liability
Don’t Miss: Progressive Auto Insurance Telephone Number
Types Of Damage Covered By Product Liability
Of course, youre making the effort to put out the best craft you can. But once a product leaves your care, there are lots of things that can go wrong, and you want to be prepared. According to Cornell Laws Legal Information Institute, product liability refers to risk exposure stemming from:2
- Manufacturing and production defects
- Design flaws
- Inadequate warnings or instructions
- Damages or injuries stemming from product malfunctions during normal use after the product was sold or a project was completed
Furthermore, it can protect against the financial consequences from claims for injury or damage that are based on strict liability, meaning the claimant has proven that:
- Your product injured the claimant
- Your product had a dangerous defect
- The injury occurred when the claimant used the product correctly
- No substantial changes happened to the product after leaving the seller.
If, for example, your handmade soap causes a health issue for one of your customers and it sends them to the hospital, you could be held liable if they decide to sue you. In this situation, Thimbles Soap Makers Insurance could provide the investigation of the claim, your defense in court, and then cover the settlement or judgment costs.
Product Liability Insurance Requirements
Product liability is not a legal requirement for a business to operate, but any company that manufactures, distributes, or sells products would be wise to get coverage. Product liability lawsuits are one of the most common forms of litigation, with tens of thousands of cases filed in the U.S. each year. They are also one of the most expensive to resolve, with settlements and jury awards frequently reaching into the millions of dollars. A companys risk can vary based on its industry, location, and place in the supply chain, which means that every business should closely examine their context to determine the extent of product liability insurance coverage needed.
Product Liability Laws by State
There is no federal law that governs product liability nationwide in the U.S., and state laws on product liability can vary substantially. Because of this, it is important for businesses to understand the differences in product liability laws to ensure that they are choosing the appropriate coverage for states in which they operate.
Other areas where product liability laws differ include:
Product Liability Risk by Industry
Also Check: Whats The Best Dental Insurance
Is Product Liability Included In General Liability Insurance
Product Liability Insurance is typically covered under the products and completed operations section of a standard commercial general liability policy. For businesses in low-risk industries or who are not focused on potentially hazardous products, this type of coverage should be sufficient.
However, for businesses with high-risk products, like toys, pharmaceuticals, clothing and apparel, or insecticides, obtaining a separate Product Liability Insurance policy may be ideal, if not necessary. Often times, companies dealing with higher risk products or goods will not be able to obtain coverage through a CGL policy, as the risk for standard insurers is too great. These companies generally seek out specialty insurers who can offer Product Liability Insurance policies with high limits that can cover the enormous costs of product liability claims.
What Is The Difference Between Product Liability Vs General Liability
Most businesses will want to purchase a General Liability policy, which automatically includes Product Liability as a component of coverage. A stand-alone Product Liability policy only covers lawsuits arising out of defective products and completed operations. However, most manufacturers and distributors have additional exposures not limited to their products.
A General Liability policy provides the additional coverages of premises/operations , personal/advertising injury , damage to premises of others , and premises medical payments .
In addition, the difference in cost between a stand-alone Products Liability policy and a General Liability policy is usually insignificant. Furthermore, most contracts with vendors will require a full General Liability policy.
For more information, see General Liability Insurance for Product Distributors.
Don’t Miss: National Continental Insurance Company Nj
Youre Our First Priorityevery Time
We believe everyone should be able to make financial decisions with confidence. And while our site doesnt feature every company or financial product available on the market, were proud that the guidance we offer, the information we provide and the tools we create are objective, independent, straightforward and free.
So how do we make money? Our partners compensate us. This may influence which products we review and write about , but it in no way affects our recommendations or advice, which are grounded in thousands of hours of research. Our partners cannot pay us to guarantee favorable reviews of their products or services.Here is a list of our partners.
Tips For Saving On Product Liability Insurance
There are several things that companies can do to decrease their product liability premiums. The most important and obvious one is good risk management.
The fewer claims you see, the less youll pay for coverage and vice versa. Companies who make, sell, and distribute products need to be vigilant about ensuring the quality of their products. They need to implement testing protocols and perform very strict quality control in order to make sure that their products are not defective.
Of course, employee training is also very important in this process, since the quality of their work is often a deciding factor in the quality of your products. Also, if you are working with partners who manufacture, distribute, or sell your product, make sure that you are working with trusted companies that are also well insured.
Most companies will be able to simply add a product liability endorsement to their general liability policy since only larger companies truly have a need to purchase an independent product liability policy to cover very specific coverage needs.
Since it is usually bought with a general liability policy, another good way of saving on this coverage is by bundling the general liability policy and purchasing it as part of a business owners policy .
You May Like: Auto Insurance Quotes Online Comparison
Do I Need Product Liability Cover If I Sell Second
Yes, if anything, product liability cover is even more important if you sell second-hand products. When it comes to new products, most of the liability lies with the manufacturer. But if your business deals with second-hand goods for example, an it can be difficult and sometimes impossible to locate the original manufacturer. In this case, the liability falls on you.
Does General Liability Insurance Cover Product Liability
General liability insurance provides financial protection if you are held responsible for some of the most common accidents that can occur at a business, such as a customer injury or damages to someones property. It also provides coverage if you are forced to defend an accusation of libel or slander.
In addition to these types of coverages, general liability also provides product liability coverage for injuries and damages caused by your products.
Retailers and manufacturers get product liability coverage as part of their general liability coverage, which helps to more thoroughly protect their business.
Also Check: Primary And Secondary Insurance Rules
Other Coverage Options To Consider:
Commercial general liability insurance: Commercial general liability insurance is designed to protect you and your business from a loss if youre found legally liable for bodily injuries or property damage to a third party caused by the product you sell or the service you provide. CGL insurance can also offer protection in situations where you or your employees are conducting business offsite.
Cyber risk and data breach coverage: Cyber attacks are an ongoing threat to small businesses and have continued to rise recently. Cyber event expense coverage is designed to help small businesses that rely on technology mitigate some of the expenses that may incur as a result of a cyber hack.
Professional Liability: If one of your clients or customers claims your advice caused them a financial loss, your professional liability coverage can help you recover from the financial consequences that may incur. This coverage is also known as errors and omissions coverage.
Property insurance: As a small business owner, you likely rely on your property, tools, equipment and technology to help keep your business running. If one of those key pieces of the puzzle was damaged and needed repair, you may not be able to continue operations. This is when you need property insurance coverage.
Commercial auto insurance: If you or your employees use your vehicle for business purposes you need commercial auto insurance to protect that vehicle in ways your personal auto policy may not be able to.
What Is Product Liability
Products are not always perfect, and occasionally, a defect that occurs in the design, manufacture, or sale of the product may have adverse consequences for those who buy it. As such, manufacturers, distributors, retailers, and others in a products supply chain can be held legally responsible when a defective product causes injury or property damage to another business or individual. The legal doctrine of product liability serves to hold businesses accountable, compensate those who experience harm, and ensure that products are safe and work as intended.
You May Like: What’s The Difference Between Whole Life And Term Life Insurance
Product Liability Insurance Vs Product Recall Insurance
In the case of a product recall, Product Liability Insurance pays out the costs associated with a customers lawsuit against you. It does not cover any of the costs of recalling your product, i.e., removing your product from the market and rehabilitating your companys reputation, which would be covered by product recall insurance. Product recall insurance also differs from Product Liability Insurance in that it can be activated before anyone is harmed. You do not need to be sued in order to use your product recall insurance.
Example:
- A company sells canned soup and has been getting complaints about food poisoning from their chicken noodle variety. Four people come forward to sue the company for pain and suffering, and they win. The company is protected from the costs of the lawsuit through their Product Liability Insurance. However, the faulty chicken noodle soup continues to circulate on shelves throughout the Midwest. Product recall insurance would cover the costs to recall the soup and prevent new infections.
Factors That Affect The Cost Of Product Liability Insurance
As mentioned above, insurers will consider a variety of factors when assessing a businesss potential risk exposure to product liability claims and set rates accordingly. Industry is typically the most significant consideration, but it is not the only factor that will influence the cost to obtain a product liability policy. An insurers assessment of a businesss product liability risk will usually include the following:
Recommended Reading: How Much Are Root Canals With Insurance
How To Get Product Liability Insurance
Product liability insurance may be included in a business owners policy a bundled insurance package that provides different types of business insurance, including general liability insurance, commercial property insurance, and workers compensation. A BOPs exact coverage varies depending on your insurance company and industry. If your company falls under manufacturing, distribution, retail, food, construction, beauty, or repairs, your BOP likely includes product liability insurance .
Depending on your business, your general liability insurancewhich provides broad coverage against injury and property claimsmight already give you sufficient product liability insurance. Many of these policies do. If you have general liability insurance, find out whats covered and whether you need to purchase additional policies.
As with other types of insurance, the best way to get product liability insurance for your businessbundled in a BOP or on its ownis by requesting quotes from a few different insurance providers for comparison.
What Are The Exclusions Of Product Liability Insurance
Its important to note that Product Liability Insurance is third-party insurance, meaning it covers claims brought on by third parties. This would not include anyone who is part of your business or who you employ. Third parties could include customers, vendors, or clients.
Other important exclusions to Product Liability Insurance include property damage or bodily injury that occurs:
- Intentionally
- As a result of products still in your physical possession
- As a result of the transportation of your product
- As a result of crime or fraud
Don’t Miss: Cancel For Any Reason Trip Insurance
What Is Product Liability And Recall Insurance
Product liability and recall insurance helps protect your business from the financial fallout of claims that one or more of your products caused injury or other damages to a third party .
Someone could be harmed by a product in a variety of ways, from the way it was manufactured or designed to how they were instructed to use it. Companies also are often sued for injuries sustained when a product was misused.
With the possibility of settlements running to multi-millions of dollars, even a single injury claim or recall could cause significant harm to a companys balance sheet.