Companies offering tangible products or services risk third-party lawsuits claiming bodily injury or property damage. Consider McDonald’s notorious “Hot Coffee” case in the 1990s, for example. No matter if the claims are grounded or not, this policy covers defense fees and settlements.
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.
Manufacturers
From the product’s beginning, manufacturers are at the frontlines to be 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.
Why you need Product Liability Insurance
Summary
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, mostly if marketing messages were unclear. Many elements can cause this disappointment, such as inadequate labeling, design defect, and manufacturing defects.
Plus, it doesn’t have to be a massive injury or class action lawsuit to have a disastrous impact on your business. Any claim of bodily injury or property damage could lead to lengthy litigation and substantial defense costs that hamstring your operation. Product liability insurance responds to these types of situations.
Reasons for getting Product Liability Insurance
Protects against inadvertent customer injuries or damages claims
Safeguards your product or service from failing entirely
Covers legal fees and settlement in product liability lawsuits
Manufacturing Defects
A manufacturing error taints a batch of cosmetic products, which severely irritate 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.
What Does Product Liability Insurance Cover
Product liability insurance protects your company from third-party physical injury claims — either bodily injury or property damage — caused by your products. These claims come at the company from multiple angles:
Manufacturing defects
Design defects
Inadequate labeling
Any number of these situations can give rise to claims under product liability insurance for startups and massive companies alike. With a product liability insurance policy in place, the insurance carrier will pay the costs of legal defense as well as covered judgments and settlements made against the company following these types of injuries.
Product Liability Insurance Claim Examples
Here are some claim examples that illustrate what Product Liability Insurance covers
The maker of a bicycle fitness tracking & GPS device 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. An online cosmetics retailer gets dragged into a suit when one of the products sold on their website began causing painful rashes. 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 a drone that flies between hospitals to provide rapid emergency organ transportation. While on a maintenance run, the 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 pedestrian is badly hurt while tripping over a charging station installed on the street by a bike-share company. Before fault is determined in court, the customer’s family makes a claim against the company. As part of the claim, they demand reimbursement for first aid, ambulance services, x-rays, surgery, and ongoing professional nursing service. The insured submits this claim to the carrier, and the carrier pays, subject to the limit, before establishing whether or not the insured is legally liable in this case.
Product Liability Insurance FAQs
The cost of product liability insurance will depend on several things, including the company’s size and the company’s stage of development. 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
Employee injuries sustained while manufacturing the product
Recall expenses
Product damages
Lost inventory costs
How it works
Finding insurance coverage doesn’t have to be painful. We aim to make the purchasing experience as streamlined & intuitive as possible.
1
Get a quote
Use our custom built online portal to get quotes fast. We automate clerical tasks that plague the traditional insurance brokerages, giving us more time to be responsive and alert to your company’s needs.
1
Get a quote
Use our custom built online portal to get quotes fast. We automate clerical tasks that plague the traditional insurance brokerages, giving us more time to be responsive and alert to your company’s needs.
2
Pair with a specialist
No two organizations are the same. Our team of coverage experts partners with your team to engineer your risk management strategy, together. We take the time to understand the intricacies of your company to get you the best possible coverage.
2
Pair with a specialist
No two organizations are the same. Our team of coverage experts partners with your team to engineer your risk management strategy, together. We take the time to understand the intricacies of your company to get you the best possible coverage.
3
Stay one step ahead
To do better, you need to know better. With changing political, technological, legal and economic landscapes, staying ahead of the curve is critical.
Our in-house team is tapped into the latest developments of your industry, proactively ensuring you’re covered.
3
Stay one step ahead
To do better, you need to know better. With changing political, technological, legal and economic landscapes, staying ahead of the curve is critical.
Our in-house team is tapped into the latest developments of your industry, proactively ensuring you’re covered.
Lately it seems like everything from children’s toys to food products are being recalled. Product recall is defined as “insurance coverage for the cost...
Product liability insurance is an extremely important piece to the risk mitigation puzzle, particularly for startups that sell a tangible product. Usually included in a General...
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