If you sell, manufacture, distribute, or handle products, you may be exposed to lawsuits if that product causes bodily injury or property damage to a customer or end user. Proper product liability insurance protects you, your business, and your customers against the financial effects of a product liability lawsuit.
All around the world, defective or dangerous products cause injuries on a daily basis and Hong Kong is no exception. In many parts of the world like the US, product liability is governed by specific acts or legislation. In Hong Kong however, product liability claims are examined under the contract law and tort law in addition to the Consumer Goods Safety Ordinance which requires manufacturers, importers and suppliers comply with safety requirements and standards associated with different products.
As society becomes more litigious and shoppers more aware of their rights, product liability claims are on the rise as consumers look to hold businesses accountable.
What is Product Liability?
Product liability is when a consumer brings a legal action against a manufacturer or supplier of a defective product. Most of these lawsuits involve claims of negligence in the creation or handling of the product which resulted in a dangerous product which caused bodily injury or property damage to the end user. In addition to some issues with the product itself, your business could be found liable for failing to properly instruct, demonstrate, or provide adequate warnings about the product. Even issues related to packaging can be fair game for lawyers.
One common misconception about product liability is that only manufacturers need to be worried about such claims. This is unfortunately untrue. While the blame may ultimately lie with the manufacturer, consumers (and their lawyers) will likely take a scorched earth approach suing everyone in the supply chain - manufacturers, importers, wholesalers, retailers, etc. - in an effort to find the weakest link with the deepest pockets.
This means that anyone involved with handling any products should consider purchasing product liability insurance. Some examples include:
- Manufacturers of finished products or their components
- Importers and distributors
- Wholesalers and retailers
If you handle products in some way, you could be open to lawsuits from end users.
What is Product Liability Insurance?
Product liability insurance is a subset of liability insurance that is meant to protect you, your business, and your customers against any bodily injury or property damage arising out of a defective or dangerous product.
The limit of insurance chosen is used to pay any damages awarded against your business by the courts but more importantly, the insurance company will handle and pay for your defense. This supplementary coverage will respond even when the lawsuit is without merit or if the responsibility ultimately lies elsewhere (ie. with the manufacturer or supplier).
Because your insurance company has a vested interest in the outcome of such lawsuits, they will take care of hiring and paying for lawyers, expert witnesses, court costs, etc. in order to secure the best outcome for your business. With lawsuits now dragging on for years through the court system, this coverage is worth your insurance broker’s weight in gold as costs can very quickly pile up.
The specific coverages offer vary and can be tailor-made for your business needs.
How Much Does Product Liability Insurance Cost?
Product liability insurance costs vary based on many factors. Some known factors include:
- Revenues: the more you sell, the higher the risk of something going wrong
- Geographical Breakdowns: if you sell a lot of products in high-risk areas like the United States, you can expect to pay more for your product liability police
- Types of Products: naturally, some products inherently pose a higher risk of loss than others. All things being equal, a pen manufacturer would expect to pay much less for their product liability insurance then a pharmaceutical company
Any company involved in a product’s life including retailers, wholesalers, and manufacturers are continually at risk of product liability even years after making the sale. Knowing this, prudent business owners should consider purchasing product liability insurance to transfer the financial risk.
Speak with a Trusted Union product liability specialist about your product liability risk. We have access to over 40 multinational insurance partners to tailor-make product liability coverage for you based on your specific business needs. Whether you’re looking for claims made or occurrence coverage, we offer competitive rates on global products liability insurance.