If you own a business that creates, manufactures, distributes or sells products, your company could be liable if the product causes harm to others. In todays’ society, product liability cases are on the rise year over year with lawsuits brought by consumers looking to blame any and all parties associated with the creation, sales, and distribution of a product they perceive to be dangerous to the public.
Even if the customer uses a product incorrectly, your business could be liable for any damage caused by the product. This means that even if you’re not genuinely responsible for loss, you could be caught up in a lawsuit as collateral damage. The potentially high cost of lawsuits makes product liability insurance a vital component.
What is Product Liability Insurance?
Product Liability Insurance is designed to protect you and your business if you are found liable for bodily injury or property damage losses that arise out of a defect in a product you sold, manufactured, or distributed. The cover can also pay if you or your business is found liable for failing to instruct, demonstrate, or provide adequate warnings about a product you sold, manufactured, or distributed. In other words, product liability insurance ensures that you’re not on the hook for costly lawsuits if your product happens to hurt someone.
What does Product Liability Insurance cover?
Product liability insurance helps pay for legal expenses when a product that you made, sold, or distributed causes a personal injury, property damage, or other loss.
Specifically, product liability insurance can provide coverage for:
Injury caused by a product. If an item that you made or sold causes a bodily injury, product liability insurance can cover the cost of hiring an attorney. It would also cover the resulting settlement or court-ordered judgment.
Property damage caused by a product
Product liability insurance provides coverage when an item you sell or manufacture damages a customer’s property. The damage could be related to a product defect or a mistake in an instruction manual that led it to be used incorrectly.
Illness caused by a product
This insurance coverage protects against illnesses caused by products sold or manufactured by your business. That includes everything from expired food that sickens a customer to a beauty product that causes an allergic reaction.
Wrongful death caused by a product
Product liability insurance also covers lawsuits, burial costs, and other expenses related to a death caused by your product.
What does Product Liability Insurance not cover?
Product liability insurance coverage protects against the most common risks associated with products, but it doesn’t provide all the protection you need. Your policy will not cover the following types of claims:
Product recall costs. Product recall insurance covers the cost of recalling a defective product.
Damaged or stolen products
The commercial property insurance included in a business owner’s policy (BOP) protects your own business property from theft, fires, and other losses. It includes protection for your building and its contents, including inventory.
Employee injuries
If an employee is injured by a product sold or manufactured by your business, workers’ compensation insurance would cover the employee’s medical expenses. It would also cost your legal costs if the employee sues over the injury.
Business interruption incidents
If your business is forced to close temporarily, business interruption insurance can cover day-to-day expenses until your business reopens. The closure typically must be tied to a property insurance claim, such as a fire or burst pipe.
Contingent business interruption insurance provides financial protection if the loss of a supplier affects your ability to do business. For example, it would cover costs if a supply chain disruption temporarily shut down a manufacturing plant.
Who needs Product Liability Insurance?
Not every business need product liability insurance—it’s only necessary for companies that produce, distribute, or repair physical products. However, it’s important to remember that “product” can be widely interpreted. If your company sells food products and someone gets sick from eating your food, you’ll want product liability insurance.
Consider looking into product liability insurance if your company is in the following industries:
- Manufacturing. You’ll be held liable if your company makes something that causes bodily injury.
- Distribution. A distributor can be held liable for damages caused by defective products they distribute.
- Retail. A retail shop is liable for the products it sells, even if it doesn’t make them.
- Food. Food poisoning can lead to severe illness or even death.
- Construction. Electricians, general contractors, plumbers, and others who build physical structures can be liable for job site damage and injury.
- Beauty and cosmetology. Beauty products can cause allergic reactions and physical harm.
- Repairs. If you’re in the business of repairing products, whether it’s washing machines or cars, and someone is hurt as a result of your work, you can be held liable.
Depending on your business, your general liability insurance—which provides broad coverage against injury and property claims—might already give you sufficient product liability insurance. Many of these policies do. If you have general liability insurance, find out what’s 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 business—bundled in a BOP or on its own—is by requesting quotes from a few different insurance providers for comparison.
For more information about your insurance needs, you may consult ONYX Insurance Brokers. We would be pleased to serve you with the best services we can. Contact or email us now!
