Making a Case for Product Liability Insurance
One of the best things that could happen to a new budding entrepreneur is seeing their product creation come to life and hit the market. From an abstract concept, to the first draft, and then, finally, seeing the finished product go to market is a really exciting time. Unfortunately, in today’s complex business world in which we live, simply producing and/or selling a product has become cause for concern, and, possibly, a product liability exposure. Whether your role in the business is that of a manufacturer, distributor, or wholesaler, almost all companies with whom you do business, either a wholesale or retail operation, will, most likely, require Arizona products liability insurance on the items you are selling to them, and that is regardless of whether you have developed the product on your own or you are a sales rep for another company. Another area that should concern you is if you are retailer of one of these products, because if there is an injury that results out of the use of a product you sold to one of your customers, you may be held responsible for that claim. More often than not, resellers and retailers fail to secure this type of coverage because they feel it is unnecessary coverage since they did not manufacture the product, which is not the way to think because manufacturers are not the only ones subject to product liability exposures. In lawsuits filed for alleged negligence by the consumer, many times retailers and wholesalers are also included in the lawsuit. In quite a few 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. By procuring a Product Liability Insurance Policy, you could protect your business from a claim filed related to the manufacture or sale of products, food, medicines or other goods sold by you to the buying public. The policy 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 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 protect itself and have Product Liability Insurance to protect you in case of a claim. To better understand the need for this type of business insurance coverage, it is very important what potential liabilities your company could be facing. In looking over the many types of claims that come with product liability, here are the three most common ones. First up is a manufacturing or production flaw; this means a claim could be filed due to some part of the production process that created an unreasonably unsafe defect in the resulting product. The next type of claim would be a design defect, meaning the claim could come from the design of the product if it is inherently unsafe. This type mostly comes to mind when we are talking about claims against automobile makers. Defective instructions or warnings would be our third type of common claim. These types of claims may occur when the product was not properly labeled or had insufficient warnings for the consumer to understand. Due to these this type of claims being filed more often, you are seeing more companies now putting more detailed warnings on their products. Unfortunately in this day and age, many 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 to everyone. In looking at what a Product Liability Policy would cost, the costs run similar to most other liability coverages. The premiums usually are based upon the type of product, volume of sales, and what the role of the insured will play in the process. One more thing you should know is that there is no standard rate table 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 a much higher premium to compensate for the risk. If you are looking at developing a product or already have one ready for market, we, here at 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.
Video: Product Liability Insurance By PJO Brokerage