Product Liability Insurance

Product Liability Insurance

Product liability insurance provides protection for products you design, manufacture, market,  and distribute.  In our ever increasingly complicated and litigious world, this type of coverage is more important than ever.  Many of the customers to whom you sell your products will require the manufacturer, distributor, or wholesaler to have liability coverage. Even retailers may be held responsible if a product they sell causes injury.  Hence, the importance of this coverage is common for all in the chain of manufacturing, distribution, and sales of products.

What is Product Liability Insurance? -Product Liability Insurance covers the policy holder in the event a suit arises out of the use of the insured’s products.  This can be loss to personal property, business property, injury, or death. Some of the types of items covered include food, clothes, toys, tools, building materials, furniture, pet items, and electronic devices – just about anything which is manufactured and sold.

What does the insurance cover? -The insurance is designed to help protect the business against losses.  This is the case even if the business is found not to be at fault.  Often times the cost of defense, between legal costs and court costs, can have a significant negative impact on the finances of a business. With properly set up insurance coverage, typically damages as well as legal costs and court fees are paid by the insurance company and can include:

  • Bodily Injury –The insurance may pay the affected business or person for the cost of care, the loss of services, and restitution for injury or death.
  • Property Damage –Protection is provided in the event your product causes damage or causes the loss of use of another’s property.

Who should have this type of coverage? – Anyone or any business responsible for the design, manufacture, sale, or distribution of a product sold to others.  Note that if your business contracts with others for the manufacture of a product you design – that does not transfer the liability.  Liability can be for design and/or manufacture and as noted above even to distributors and retailers.

What factors go into determining the cost of insurance coverage? – There are many factors which go into the cost of providing this type of insurance protection.  The riskier the product, the more expensive the insurance.  Some of the things which go into determining the cost of coverage include:

  • How many of these products will be distributed and sold?
  • What is the use of the product, and who will be the user of the products?
  • What is the intended lifespan/lifecycle of the product?
  • What is the product made of?
  • How is the product packaged?
  • What are the guarantees and warranties that go along with the product?
  • How clear are the instructions, and, if assembly is required, how easy is the assembly?

While there are some products that pose very little potential risk exposure, there are products which have a very high risk exposure and, as such, have higher premiums.

Generally, any business which has a connection to a product – manufacture, distribution, or sales - should have product liability insurance protection.

Because every business is different, we work with our clients to understand both their business and their exposure to risk.  We then can do a comprehensive risk analysis and risk profile in order to come up with recommendations for proper product liability coverage.  Contact a Heritage Group associate today to find out more about how we can help your business.