Why Product Liability Insurance Is So Important in Phoenix, AZ
One of the areas that Arizona usually ranks near the top is in new small businesses being started. Many of these new entities are companies that sell some sort of product, whether that would be from a storefront or through their website. A recent report came out that said with the advances of the internet, it has never been easier or more affordable to start a business in Phoenix, and with these advances, many of you have. One area that many people are starting are companies having to do with various products, ranging from food, durable medical goods, home products, and many gadgets that promise to make our life easier and better.
If you are one of those new entrepreneurs with a new product, then acquiring a Product Liability policy should be your first decision in your business plan. When discussing product liability insurance with a new client, almost, invariably, one of the first things they question is whether they really need this type of Phoenix business insurance coverage. Many times they say they couldn’t imagine how their product could harm someone. In the insurance industry, we never say never!
For any business that is developing a product and plans to market it, having Liability Insurance is extremely important. Also, it doesn’t matter at what stage of the product cycle you are a part of when a customer perceives that the product they purchased did them harm. They will target everyone that is associated with this product, and it could end up costing your company not only a costly claim but also an expensive and time consuming lawsuit. This type of legal concept is better known as stream of commerce, and it governs product liability in most states. What this means is that any company that has any involvement in placing a product into the commercial stream may be held liable for a defect, thus exposing the business to the risk of paying damages for the defect. If a consumer is successful with their claim, they may be awarded compensatory and punitive damages (where allowable by law), medical expenses, and also their attorney fees. In general, claims of these types center on the following three main issues:
Design Defects: When talking about this type of claim, it usually refers to how the product was designed in the first place. A common example of this type of claim would be automobile manufacturers.
Defective Instruction/Warnings: Have you ever noticed some of the warnings they have on the side of products and think to yourself, common sense would tell me that. Well, the severe legal risks that could happen if the potential dangers that the consumer would suffer is the reason. Because of these types of claims being filed more frequently, you are seeing more companies now putting very detailed warnings on their products.
Manufacturing/Production Flaws: This particular type of claim usually involves a product that is defective as a result of the company’s production process, thus making the product unsafe.
Please note that even if your company did everything it could to take all reasonable precautions, things do happen that could harm a customer for which your company could be held liable, hence, the need for a Product Liability Insurance policy. By having Product Liability Insurance, the insurance carrier has a duty to defend you in the event of a claim, cover the costs to investigate the claim, and pay out any settlement or judgment that be made against your company up to the limits of the policy.
Another thing that you should be aware of when looking at this type of policy is that in determining policy premiums, there is no standard rate table due to the fact that these policies are based upon the specific type of product you design, manufacture, or market. Some products that present a low risk of damage or harm to the consumer usually have a lower premium, and products that pose a much higher risk to the consumer will require a larger premium to compensate for the risk.
If your company is developing a product, distributing a product, or simply selling a product, PJO Insurance Brokerage has the experience and expertise to help you develop a comprehensive insurance plan to suit your product liability needs.
PJO Insurance Brokerage
By Patrick O’ Neill
4103 E. Prickly Pear Trail
Phoenix, Arizona 85050