Posted on May 17, 2014
Companies that make, sell, supply or deliver products, goods or services have an absolute need for product liability insurance. This valuable coverage protects businesses from lawsuits or claims of personal injury or property damage caused by their product.
Businesses can be held liable not only for claims of defect in the product itself but also in the labeling and packaging as well as storage and transportation of that product. Even if a company does not design or create the product and only acts to resale it, they can still have legal responsibility should the item cause injury or damage to third parties. Consumers have sued resellers and retailers for negligence regarding products that they did not even manufacture.
Companies that have their brand name on a product will also want to make sure to obtain product liability insurance. Laws regarding product liability vary by state; however, common causes of action in the court system usually stem from negligence, consumer protection, breach of warranty and liability claims. In essence, any company in the supply chain from manufacturer to end user has potential liability for damages.
Businesses may face claims for flaws in the manufacturing or production process, defects in design or improper warning labels or instructions. Any claims of unsafe defects have the potential to financially ruin a company's entire operations.
Product liability insurance will pay for legal defense fees and medical expenses in addition to economic, compensatory or punitive damages awarded by the court. However, proof lies with the manufacturer of goods to prove that the product was not faulty and that instructions and warnings were provided to the end user. Quality control and proper record keeping are essential to defending companies with product liability claims.
Ultimately, businesses cannot control what the end user will do with their product; however, having product liability insurance in place with the proper policy limits will go a long way in protecting companies from costly and lengthy court proceedings about their goods.