Product Liability Insurance: The Ultimate Guide
Product liability is a real risk when conducting business. You may suffer legal damages if your products cause personal injury or property damage.
Product liability insurance is designed to protect your business from any legal liabilities arising from your defective product.
You might be wondering:
What is product liability insurance about, and whether do you need it for your business.
In this ultimate guide to product liability insurance, we will show you
what is product liability insurance;
how to assess whether do you need product liability insurance in your business; and
what you should consider before purchasing a product liability insurance.
What is Product Liability and Product Liability Insurance?
You have to understand product liability before understanding product liability insurance.
Product liability is the legal claims that arise from the manufacture or sale of products that results in personal injury or property damage.
There are 3 points to take note in the above definition:
First, the claims must be related to products. Products can be any physical products, food and beverages, cosmetics, medicines or health supplements.
Second, the personal injury or property damage must be the result of defective products.
Third, legal claims arising from such products can be made against the manufacturers and distributors. Even if you are the distributor, you will still be liable for any potential product liability.
Therefore, the idea of product liability insurance is to insure you for this risk.
Do note that product liability insurance does not cover defective products. It is not a warranty. It only covers the liability arising from defective products.
Common Industries that Need Product Liability Insurance
These are the industries or businesses that need product liability insurance.
Without doubts, manufacturers have the highest product liability risks. When your end customer uses your defective product, causing property damages or bodily injuries to them, you are legally liable under the law of tort.
So, if you produce any products, you will need product liability insurance. It does not matter whether is the product being sold or given away for free.
If you are a product designer, you may still be liable for product liability if the defects arise from your design, and not manufacturing process.
As a party who is involved in bringing the product from manufacturer to retailer, you are also exposed to product liability risks. When your retailer faces lawsuits from their customers, they will attempt to push the liability to you.
To protect yourself from such cases, you could either purchase a product liability insurance or include your interests in the manufacturer’s product liability policy.
Due to the principle of strict liability, you can still be liable for product liability as a retailer if you are selling defective products. When a legal liability is established, your customers will seek recourse against a party that they know, i.e. you, rather than the manufacturer.
You can protect yourself by including your interests in the manufacturer’s product liability policy.
E-Commerce Online Sellers
E-Commerce has started to pick up in the recent years. Selling online is easy. You can sell your products from online platforms such as Lazada or Qoo10, or you can set up your online store.
But what happen where there are defects in the products that you are selling?
Being an online seller is no different from a retailer. In the event of you selling defective products, you will be the first your customer will look for. This means that there is a potential liability on your site as a seller.
Restaurants / Cafes / Bar
Products also include food and beverages (F&B). You can be exposed to product liability risks when your food causes food poisoning or even death.
Do contact us should you require any F&B Package.
Health and Beauty
One of the most common products in health and beauty industry is health supplements. As a manufacturer and seller of health supplements, you are exposed to huge product liability risks.
Imagine the scenario where the supplements that you are selling causes food poisoning, liver failure, or even death. How many people will be looking for you in the case of this happen?
What You Should Consider Before Buying Product Liability Insurance
Do You Have Product Liability Risks?
Do you have legal liability risk to your end customer?
Think about the products that you are selling, what could go wrong? If you are selling clothes or simple accessories that are from established brands, the chances are slim. You may not need a product liability insurance.
You can also use Google to assess your product liability risks. Search for the following in Google:
[your product] + “lawsuit”
For example, if your product is health supplements, you can search for:
health supplements + “lawsuit”
You will get the following results:
It seems like there is at least a case of product liability case where the health supplements cause liver damage.
Note that these methods are not conclusive. Just because there isn’t a case of product liability lawsuit in your industry doesn’t mean it would not happen in the future.
What can you do instead?
If you are unsure, we welcome you to give us a call/email us at email@example.com for a free consultation.
Can you prevent or minimize the chance that your products have defects?
The best way to manage product liability risk is prevention. Are you able to prevent yourself or minimize the chances that your products are defective?
Here are some tips which you can minimize your exposure:
Having a better quality control process if you are the manufacturer;
Selling products from reputable brand, and avoid selling products which you do not know the origin;
Providing adequate warning if your product can cause hazards or health issues;
Your exposure might have already been covered by the manufacturer or your supplier. Check with your suppliers on potential product liability cases. Make sure you have their policies in writing.
Cost of Product Liability Insurance
Depending on your requirements and coverage, the costs of the general liability insurance can vary. We need more details of your company’s operations before advising you on the cost.
Requirements for the Cover
Not every company has the same requirements. For industries with high product liability risks, you may need to fulfill certain quality control requirements before the insurer is willing to insure you.
Reputable Insurance Company and Agent
This applies to all kind of insurance. Having a reputable insurance company and an agent will give you the assurance that your risks are being well-managed.
A well-qualified agent will also be able to advise on your coverage, specific to your situation and industry.
Product liability risk is one of the common business risks for manufacturers and retailers. Fortunately, you can transfer the risk using product liability insurance.
Do you want to manage your business risk and minimize your risk exposure? Please consider insuring your risk with Anthola’s general liability insurance package. Contact us for a free consultation on your business. We love to speak to you!
Or call us at +65 6298-6222.