Does Your Business Need Product Liability Insurance?

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Does Your Business Need Product Liability Insurance?on avanteinsurance.com

How to protect yourself from lawsuits regarding product defects

The concept of requiring product liability insurance isn’t a pleasant one. Every business likes to think their product will be safe and sound when it goes to market. It means you have to entertain the notion of people or property being damaged by a product you provided. Many businesses are covered to some degree by their Commercial General Liability (CGL) policy which covers non-professional acts of negligence. Product liability insurance is another matter.

The number of claims brought against businesses for design, marketing and manufacturing defects are not only numerous, they’re some of the most highly expensive. A defendant who loses a case stands to pay for hospital and health care fees, lost earnings, the plaintiff’s legal expenses and so on. It’s a costly reality lurking for even the most conscientious operators, so the adage “better safe than sorry” applies in spades.

Let’s look at how impactful a liability claim can be.

Product liability pay outs are always high

The financial compensations awarded to a victim of a product defect are very significant, (often the highest in the legal field). Figures from the Insurance Information Institute typify the statistics and it’s a sobering sight. Product liability compensations outstrip even medical malpractice. In fact, the Institute’s 2017 Fact Book places the United States at the top of the world’s ten largest commercial liability markets.

Finding who’s to blame

If you find yourself handling a liability claim you should be able ascertain just how much of that liability is yours. Were you negligent in safety procedures during your stage of the production/distribution chain? Was the end user negligent in their use of your product? There’s also strict liability and that’s a tough one to get around for a product provider. The law differs from state to state.

Defining negligence

If you’re a plaintiff living in Alabama, the District of Columbia, Maryland, North Carolina or Virginia you’re not entitled to claim damages if it can be proven you’ve been even one percent negligent in the use of a product. You might imagine that businesses in those states may be relaxed about PL insurance (but they forget the compensation figures linked above at their peril).

In every other state, payouts can be decided based on shared negligence, if any exists. The degree to which the defendant is found responsible will determine the damages paid. This is defined as comparative negligence and is the legal procedure in Florida.

PL insurance will protect you against claims of personal injury or property damage but it’s not a catch-all for every claim thrown at you. You’re expected to be on top of your safety protocols and making sure they’re being adhered to. In the event of your product failing to carry out its task (particularly products on which lives may depend) you will find yourself in a seriously precarious legal position. Some issues beyond property and physical damage can be insured against if you’re willing to pay up for higher premiums.

Defining strict liability

Strict liability (also known as automatic responsibility and absolute liability) is as harsh as those names sound. In short, if a plaintiff can prove they were injured by your product then they are not required by law to prove you were negligent in its provision. The fact that what you produced damaged them or their property in some way is enough for a court to award compensation.

Don’t look away from liability

If you’re a manufacturer, seller or distributor it’s in your best interests to seriously consider product liability insurance. Even this brisk summary of the facts is enough to illustrate why. If a liability case can be brought against you where they don’t need to prove negligence, is leaving yourself uncovered worth the risk? Take these tips on board:

• Treat liability claims as a real possibility

• Be as aware as you possibly can at every stage of the production and distribution chain

• Label your products with precise information on contents and methods of use

• Premiums will differ based on your business sector, location and product. For real peace of mind, consider contacting a qualified insurer to protect yourself against personal injury and property damage claims and avoid becoming over-insured.

Avante Insurance is a South Florida family owned and operated insurance agency serving an array of insurance services to meet customer’s individual needs. If you’d like to know more about product liability insurance, you can call us at 305-648-7070, request an insurance quote or contact us with any questions or comments.