Blockchain
Cannabis
Cryptocurrency
Influencers
Micromobility
On-Demand & Shared Economy
On-Demand Delivery
Robotics
SPACs
Web3
AI
E-Commerce
Education Technology
Esports
Fintech
MSPs
SaaS
Startups
Technology
Life Science Risk Management
Biotech
Dietary Supplement & Nutraceutical
FamTech & BabyTech
HealthTech
Pharmaceutical
Virtual Care, TeleHealth, & Telemedicine
Financial Services
Professional Services
Media & Advertising
info@foundershield.com 
114 E 25th St, New York, NY 10010 
646.854.1058 
Product Liability Insurance
Companies offering tangible products or services risk third-party lawsuits claiming bodily injury or property damage. For example, suppose a customer has an allergic reaction to a product they bought from your business and sues for medical costs and other financial damages from using it. Consider McDonald’s notorious “Hot Coffee” case in the 1990s, for example. Whether the claims are grounded, this policy responds to similar situations, covering defense fees and settlements.
What Is Product Liability Insurance?
Product liability coverage is a type of liability insurance designed to protect businesses that manufacture, distribute, or sell products. This business insurance provides financial protection if a product sold by a company causes harm or injury to a consumer. Product liability insurance covers legal fees, court costs, and settlements or judgments resulting from a product liability claim.
It’s not uncommon for a product or service to “fail” or fall short of the customer’s expectations. Substandard work is one thing, but not meeting someone else’s presumption is another — often, marketing messages were unclear. Conversely, other causes of product liability claims are inadequate labeling and manufacturing and design defects.
Product liability coverage is critical for businesses of all sizes that produce, distribute, or sell products. Accidents can still happen even if a company takes every precaution to ensure its products are safe. If a consumer is injured or harmed by a product, they may file a lawsuit against the business responsible. Product liability insurance can provide a safety net for businesses in these situations, protecting them from financial ruin.
Overall, product liability insurance is an essential tool for many businesses. By providing financial protection and risk management services, this type of insurance can help companies thrive while minimizing their liability risk.
Product Liability Coverage
Product liability insurance coverage is specially designed to protect businesses that manufacture, distribute, or sell products.
Who Needs Product Liability Insurance Coverage?
Plenty of companies offer some tangible product or helpful service to customers. After all, that’s the most popular route to forming a viable business. All too often, though, customers take legal action against your product or service, claiming bodily injury or property damage. Product liability insurance protects your company against lawsuits alleging injury or damage caused by your product or service. This policy helps to cover affected customers, but it also protects your company against costly litigation, frivolous or not.
Furthermore, it doesn’t have to be a massive injury or class action lawsuit to have a disastrous impact on your small business. Any claim of bodily injury or property damage could lead to litigation and substantial defense costs that hamstring your operation. Product liability insurance responds to these situations, providing the capital to cover legal fees and medical costs.
Companies in many industries benefit from product liability insurance; however, the following industries get the most from this coverage:
Manufacturers
From the product’s beginning, manufacturers are at the frontlines of being legally liable for their products.
Distributors
Business-to-business operations are also at risk for product liability claims.
Retail/Ecommerce
When companies make and sell their products, they run the risk of that product falling short somehow.
What Does Product Liability Insurance Cover?
You must consult your policy documents to confirm exactly what coverage your product liability insurance provides. However, here are a few scenarios that typically would be covered.
Manufacturing Defects
A manufacturing error taints a batch of cosmetic products, severely irritating customers’ skin.
Design Defects
There’s a weak spot on the new bike frame you’ve designed, causing the front fork to buckle and throw the rider over the handlebars.
Inadequate Labeling
Though perfectly harmless, your dietary supplement lacks specific labeling that provides adequate/required warnings to consumers.
Product Liability Insurance Policy
Intellectual property insurance protects against the following:
How Can I Manage My Product Liability Insurance Policy and Risks?
Managing your product liability insurance policy and risks means knowing your unique exposures. We live in a litigious society, and many people won’t think twice about filing a product liability lawsuit, regardless of whether it’s grounded. Company leaders and small business owners must do their due diligence, fully understanding the legal landscape and assets needing protection.
Also, it’s vital to understand other policies that work with a product liability policy, such as general liability insurance and product recall insurance. Moreover, company leaders must know where their operations fall in the supply chain, knowledge telling of any future liability.
Aside from financial protection, product liability insurance can help a small business improve its products and processes. Insurers often offer risk management services to their clients, helping them identify potential hazards in their products and processes and providing advice on minimizing risk. By taking advantage of these services, businesses can reduce their risk of facing a product liability claim in the first place.
What Does Product Liability Insurance Not Cover?
Claims related to product liability can vary immensely, from physical harm because of beauty products or an improper warning to allergic reactions due to defective products. On the one hand, many companies are often surprised to be held liable for claims related to these products or situations. On the other hand, many times a consumer sues a company, the case is ungrounded. For example, employee injuries typically fall under workers’ compensation policy, not product liability coverage. Some conditions that product liability insurance doesn’t typically cover include:
Product Liability Insurance Cost
As with most commercial insurance policies, the cost of product liability insurance coverage depends on several factors: location, claims history, and policy limits, to name a few. However, the following are some other main points insurance carriers will consider when calculating a premium.
Product Liability Insurance Cost Factors
The cost of product liability insurance will depend on several things, including the company’s size and developmental stage. Other factors include:\
- Exposures: risks being insured.
- Company practices: views on safety, compliance, and risk management.
- Program structure: the amount of deductible and willingness for a company to assume more risk
- Claims history: the type and amount of past claims against the company
- Revenue: changes in revenue will often drive increases or decreases in renewal costs
Product Liability Insurance Claim Examples
Every company faces unique risks, so we can structure your policy to fill the gaps in coverage with numerous market-leading enhancements
The bicycle fitness tracking & GPS device maker instructs a user to turn at a particular time. He gets hit by a car, sustaining severe injuries. He sues the company for selling a defective product. Even though they didn’t manufacture the product, they share liability for bodily injuries to several customers as part of the supply chain.
A company manufactures drones that fly between hospitals to provide rapid emergency organ transportation. While on a maintenance run, a drone strikes a power line and lands on a house. The drone company was liable to the town and the homeowner for repairs to the damaged property.
A consumer buys a new electronic exercise machine from a manufacturer. While using the equipment, they suffer a severe electrical shock, causing burns and other injuries. The consumer must be rushed to the hospital for medical treatment, where they incur significant medical expenses, including emergency room fees, physician consultations, diagnostic tests, and prescription medication. They may require ongoing medical treatment, such as physical therapy or follow-up appointments, which can add to the overall cost of their medical expenses.
The bicycle fitness tracking & GPS device maker instructs a user to turn at a particular time. He gets hit by a car, sustaining severe injuries. He sues the company for selling a defective product. Even though they didn’t manufacture the product, they share liability for bodily injuries to several customers as part of the supply chain.
A company manufactures drones that fly between hospitals to provide rapid emergency organ transportation. While on a maintenance run, a drone strikes a power line and lands on a house. The drone company was liable to the town and the homeowner for repairs to the damaged property.
A consumer buys a new electronic exercise machine from a manufacturer. While using the equipment, they suffer a severe electrical shock, causing burns and other injuries. The consumer must be rushed to the hospital for medical treatment, where they incur significant medical expenses, including emergency room fees, physician consultations, diagnostic tests, and prescription medication. They may require ongoing medical treatment, such as physical therapy or follow-up appointments, which can add to the overall cost of their medical expenses.
Insurance Brokers For Product Liability Insurance
Founder Shield is a data-driven insurance brokerage serving high-growth, innovative industries. We have a passion for creating and developing innovative risk management products across emerging industries and work hand in hand with clients and underwriters to ensure transparency, efficiency, and reliability every step of the way. Our team has specialized expertise and experience in providing product liability insurance services.
We partner with the leading professional liability insurance carriers to craft tailored risk management programs for public companies and venture-backed companies preparing for funding rounds. With errors and omissions insurance a major budget item, we understand that companies look for new and creative solutions to help manage increasing costs while also securing best-in-class coverage.
Justin is the market-facing leader at Founder Shield, with eight years invested in the boutique broker and more than a decade in the insurance industry.
