Products Liability


A products liability policy provides coverage specifically designed for manufacturers, distributors, importers, and sellers of products.  The policy coverages provide defense and pay damages related to the manufacturing or selling of products, food, medicines, and other goods sold to the public.  Companies that carry products liability are protected for injuries caused to buyers, users, or bystanders by a defect in their product: this includes design defects and the failure to warn consumers.

Coverage triggers

The policy coverage triggers are production defects, defects in the manufacturing of a product, design defects, and the failure to warn consumers.  When a claim alleges that a defect occurred during the production process and resulted in a defective product that cause bodily injury it falls under production or manufacturing defect.  When a claim alleges that the design of a product is defective and unsafe to consumers it falls under design defect.  When a claim alleges a product is not labeled correctly and consumers couldn’t understand the risk it falls under failure to warn.

Why products liability is important

The reason the coverages provided by this policy are important is because the coverages can save the company.  It only takes one products liability claim for a company to file bankruptcy.  The types of damages that are awarded by courts for claims related to products liability include: medical costs, compensatory damages, economic damages, attorney’s fees, and punitive damages.  However, not every policy is this broad.  When you purchase a products liability policy, have your agent confirm the types of damages the policy will pay out.

Policy rating basis

A products liability policy is rated on the type of product, estimated gross receipts per year, and the insured’s role in the manufacturing process.  The rating factors are determined by the hazard or danger that a product can potentially present to consumers.  For example, a company that manufactures chemicals poses a higher risk of danger to consumers than a company that manufactures buttons.

Why companies that sell products they didn’t manufacture need products liability coverage

A common assumption among retailers, distributors, and importers is that they shouldn’t have to insure products liability if they didn’t manufacture the product.  However, these businesses have a product liability exposure because they are distributing the product directly to the public.  Retailers, distributors, and importers are also included in lawsuits for products liability.   These types of businesses also need to have products liability insurance.  The policy will provide the same coverages and protection that it does to the manufacture of a product.

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