Product Liability Insurance, Vital to Your Company
In Southern California each year, thousands of new small businesses are created, and many of these new companies will engage in selling some kind of product from a store-front operation or direct to the consumer through their own website. In fact, with all the advantages that the internet can offer a new business in this day and age, it has never been easier or more affordable to start a new business than it is in current times. Many of those new entities are in the business of selling products, everything you can imagine from food products, health-related products, energy drinks, computer-related products, and so many things that it’s hard to keep up with them at times.
If your new start-up venture is in the area of selling a product, then one of the best first moves your company can make is to make sure that you have an Orange County Product Liability Insurance policy in place. Most times when we first discuss how Product Liability Insurance can help the client, the client usually makes the comment they couldn’t imagine a case concerning their product that could harm the consumer, and ask “Is this type of insurance coverage really necessary?”; to which we reply, yes it is! If your company is developing a product and plans to bring it to market, then acquiring this type of coverage is very important.
One thing that we try to emphasize to our clients is that it really doesn’t matter where on the ladder your company is in dealing with the product if a consumer feels very strongly that they have been harmed by the product they have purchased, they are going to file a claim against every person or company that is linked to the product, which could wind up not only costing your business any settlement monies leveled against it, but it can also be very time consuming considering these things tend to drag on for long periods of time. In discussing with our clients this particular legal concept, we advise them that this is known as stream of commerce, and it governs product liability in most states. As to how this relates to your company, it means that any company involved in placing a product into the commercial stream may be held liable for a defect, thus exposing the company to the risk of paying damages for the defect. Also, if a customer is successful with their claim, they could be awarded compensatory and punitive damages (where allowable by law), medical expenses, and their lawyer’s fees. Generally speaking, claims of these types center on the following three main issues:
- Defective Instruction/Warnings: I am sure you have noticed some of the warnings placed on the side of products, and you think to yourself why that is, doesn’t everyone already know that? Well, it’s because of the severe legal risks that could result from the potential dangers that the consumer could suffer. It’s because these types of claims are being filed more frequently, and you are now seeing more companies putting very detailed warnings on their products about what could possibly happen if not used properly.
- Design Defects: When we talk about this type of claim, it usually refers to how the product was designed in the first place. The most common example of this type of claim would involve car manufacturers.
- 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 be aware that even if your business did everything you could think of, taking every precaution, there could be a situation where a consumer could be harmed by your product holding your company liable, thus, the need for a Product Liability Insurance policy. In procuring a Product Liability Insurance policy, the insurance carrier has a duty to defend your insured California company 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. When we discuss this type of policy with clients, we make them aware that these types of policies carry no set premiums due to the fact there are so many variables, such as the type of product you sell, manufacture, or market.
There are some products that carry a low risk of harm to consumers, which, in turn, usually means a lower premium; and those products we know that carry a much higher risk to the consumer will carry a much higher premium. If your business is developing a product, distributing a product, or simply selling a product, PJO Insurance Brokerage in California has the experience and expertise to develop a comprehensive insurance plan to fit your product liability needs.
Patrick O’Neill -- Owner