Product Liability Insurance protects a retail business against claims made from the sale of goods, products, medicines or foods sold to the public. It covers the retail seller’s liability for losses or injuries suffered as a result of purchasing a product by a buyer, user or bystander. It covers defective products or product malfunction. In some cases, it may also protect the seller from failure to warn. Sometimes, this coverage is found within a general liability policy for a business as products completed operations insurance. Ask your commercial insurance agent about these scenarios and what risk exposure your business faces.
A recent example of how product liability insurance works is tainted pet food manufactured in China. The pet food was then imported into Canada and then distributed to two U.S. locations which supplied the tainted pet food to Wal-Mart which sold it to customers.
A number of pets died, and Aa barrage of law suits began. The Chinese and Canadians were insulated from suits, and even if judgments were levied, claiming restitution was impossible.
The retail outlet, in this case, Wal-Mart, ended up facing the numerous suits filed by unhappy cat owners. Here is just one example of how product liability insurance can easily save a business from financial disaster. Imagine if you’re your business was facing not just one, but multiple lawsuits.
Often, resellers and retailers fail to secure this coverage. The logic is that, since they did not manufacture anything, the coverage is not necessary. However, manufacturers are not the only ones subject to product liability exposure, retailers and wholesalers are often brought into a lawsuit for alleged negligence by the consumer. Many states follow the “stream of commerce” model of liability. This means that if your company participated in placing the product into the “stream of commerce,” it can be held liable for damages to the end user.
If your business provides any products to the public for use or consumption, then your company needs product liability or completed-operations coverage. In most cases, some form of this coverage will be present in the standard commercial general liability or business owners’ policy.
Check to confirm this with your commercial insurance agent. You will want to have a clear understanding of what is covered and what is not. (For example, some policies will cover economic damages, but not punitive or statutory damages) Product liability insurance is a necessity for any size business which is distributing or selling products in the United States.
One lawsuit to a small mom and pop store can result in devastation for the business. Examine your general liability policy and determine if more coverage is needed to protect your retail store.