What’s product liability insurance and does my business need it?
In general terms, 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. If your selling or wholesaling goods for public consumption make sure you review this coverage with your commercial insurance professional.
One recent example in the headlines that can show 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 from foreign businesses. Lawsuits like this can name numerous parties liable to claims of damage and responsibility. 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 of any size, even Wal-Mart from financial disaster.
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 financial ruin for the business. Examine your general liability policy and determine if more coverage is needed to protect your business from this type of risk.