The Case for Product Liability Insurance
One of the great things about an entrepreneur is seeing your idea for a product come to life. From the first design, manufacturing of the product and finally seeing your product in the distribution channel is an exciting time. Unfortunately, in the complex world we live in now, simply selling a product has become cause for concern, and, possibly, a product liability exposure. As a manufacturer, distributor or wholesaler, most companies with whom you do business, whether a wholesale or retail operation, will, most likely, require products liability insurance on the items you are selling to them, regardless of whether you have developed the product or you are a sales rep for another company. In addition, if you are a retailer of one of these products, you may be held responsible if there is an injury that results out of the use of a product you sold. As is the case all too often, resellers and retailers fail to secure this type of coverage. Their reasoning is that since they did not manufacture the product, purchasing this type of insurance coverage is an unnecessary expense. However, manufacturers are not the only ones subject to product liability exposures. Many times retailers and wholesalers are also included in a lawsuit for alleged negligence by the consumer. In many states, the procedure is to follow, what they call, the stream of commerce model of liability. What this means is that if your company participated in placing the product into the stream of commerce, it can be held liable for damages to the consumer who purchased and used the product. Having a Product Liability Insurance Policy may protect your business from claims related to the manufacture or sale of products, food, medicines or other goods sold to the public. It covers the manufacturer’s or seller’s liability for losses or injuries to a buyer, user, or bystander caused by a defect or malfunction of the product, and, in some instances, a defective design, or a failure to warn. If your business is responsible for the design, manufacture, sale or distribution of a product or end user product, or even if your business distributes a product, or if the product’s manufacturing is subcontracted out by another operation, even if the operation is overseas, your company should have Product Liability Insurance to protect you in case of a claim. To get a better understanding of the need for this type of insurance coverage, it is crucial to understand the potential liability your company could be facing. Although there are many types of claims, following are three major types of product claims a company could face. The first type of claim is a manufacturing or production flaw, meaning a claim could be filed due to some part of the production process that created an unreasonably unsafe defect in the resulting product. A second type would be design defect, meaning the claim could come from the design of the product if it is inherently unsafe. Think about all the claims filed against car makers looking at design defects. The third type would be defective instructions or warnings. These claims occur when the product was not properly labeled or had insufficient warnings for the consumer to understand. This is why more and more companies are putting more detailed warnings on their products. Consumers are finding new ways to sue the manufacturers for claims occurring from unintended use of a product that should be common sense or knowledge. Costs for Product Liability Insurance are very much similar to any other liability insurance coverage; the premiums on these types of insurance policies are based upon the type of product, volume of sales, and the role of the insured in the process. Please be aware there are no common average rates for these types of policies because they are based on the specific type of product you manufacture, retail, or market. There are some products that pose very little potential to cause harm or damage, and there are others that have a higher propensity to be risky, and, therefore, require higher premiums. PJO Insurance Brokerage would welcome the opportunity to work with your company and put together an insurance plan tailor-made to suit your product liability needs.
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