Product Liability Insurance: What Does It Cover?

Product liability insurance is crucial for any business that is involved in the design, manufacturing, distribution, or sale of products that have the potential to cause harm as a result of flaws. The purpose of product liability insurance is to protect businesses from claims stemming from the manufacturing and selling of problematic products to the public. If your business faces the risk of expensive lawsuits over defective products, product liability insurance is an absolute must-have.

Product Liability Insurance What Does It Cover

Liability for any injuries or losses as a result of a malfunctioning product or lack of warning is covered by product liability insurance. This type of insurance policy will cover against both bodily injury and property damage. Your business could be held liable for injuries or property damage if a defective product, or a product with an inadequate warning, is the cause. Regarding bodily injury, the product liability insurance policy will provide coverage in the form of paying for the affected person’s cost of care, paying for the loss of services, and paying restitution for death caused by the injury. Regarding property damage, the product liability insurance policy will provide coverage in the form of paying the cost of property damage or paying the associated costs if that property can no longer be used. The three most common product liability claims that a business will face are as follows:

Defective Instructions/Failure to Warn: If a product that is designed, manufactured, or sold by your business does not have a proper label to explain the risks of the product, then your business could face a product liability lawsuit and be held liable.

Manufacturing Flaws: If a product that is designed, manufactured, or sold by your business has a dangerous defect as a result of the manufacturing process, your company could face a product liability lawsuit and be held liable.

Design Defect: If a product that is designed, manufactured, or sold by your business has a design that is inherently dangerous, your business could face a product liability lawsuit and be held liable.

In many cases, the retailers and resellers of a product do not understand that they can be held liable for negligence, even if they did not manufacture the product. Furthermore, many states adhere to a liability model that holds any company that was involved in placing the product into consumer hands liable for damages. Will your business have the ability to carry on after facing a lawsuit that could potentially cost hundreds of thousands of dollars or more in legal costs, on top of paying extensive damages? The idea of a product liability lawsuit crippling your business is certainly unpleasant, but it is a possibility that you can remove entirely by investing in product liability insurance.

Product liability claims can absolutely force a business to close its doors if product liability insurance coverage is not present. It is important to understand your risks, so that you can arrange the appropriate coverage for your business. Before designing, manufacturing, or selling any products with the potential to cause harm or financial loss, make sure you seriously consider product liability insurance.