Product Liability Insurance: For All Businesses?

We often hear this question: What’s product liability insurance and do all businesses need it?

If your business is a retail or internet provider of goods and services, or if you make and deliver products through distribution, you should consider purchasing product liability insurance. This coverage will protect you and the business from claims of damage caused by your product or its use.

Product liability insurance will cover against claims of damage from goods, foods, medicines or other products sold and used by the public. This insurance covers manufacturers, distributors, suppliers, and retailers in the event of a claim. It’s important to note that claims of damages or injury may come from product defect, packaging, design, labeling, storage, or handling of the product.

It’s important for a retail business or supplier to remember that they may handle hundreds or thousands of different products and claims can be brought against them even though they didn’t manufacture the product. Your business may be part of ‘the stream of commerce’ which will hold your business liable for a ‘part’ of a claim.

Work with a licensed insurance professional to determine the specific coverage needed. In most cases, a million dollar limit is considered the minimum that should be carried and what options are available to best protect your business.

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Retailers and Product Liability Insurance

Should a retailer purchase product liability insurance?

Often, manufacturers will need product liability insurance.  Retail stores also need to consider product liability insurance as well. Importers and distributors also need this kind of insurance. A retail store can be sued if a customer buys a product from them that causes injury or harm, even if they don’t make the product. In this case a lawsuit can be brought against the retail establishment and the manufacturer.

Product liability laws in the United States allow holding everyone responsible for that has anything to do with making and selling products. Large money awards because of injury claims can ruin any business if they do not have sufficient insurance for such cases.  Legal costs alone can ruin a business before a settlement or award is issued.

A fairly 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 barrage of law suits began.

The Chinese and Canadian 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 an example of how product liability insurance can easily save a business from financial disaster.

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 sellers 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.

Sit down with your licensed insurance professional and review what is available to your specific business in regards to product liability insurance.  Check with your state department of insurance for any claims or incidents on file similar to your type of retail operation, product, or industry.

Remember, it is far harder if not impossible to hold a manufacturer outside the United States responsible.  A product liability claim will often name the manufacturer, wholesaler, distributor, and seller in the suit.  Don’t risk your business on being uniformed about product liability.

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