Product Liability Insurance
Product Liability Insurance is designed to protect you and your business if you are found liable for bodily injury or property damage losses that arise out of a defect in a product you sold , manufactured, or distributed. The cover can also pay if you or your business is found liable for failing to instruct, demonstrate, or provide adequate warnings about a product you sold, manufactured, or distributed.
In our litigious society, product liability cases are on the rise year over year with lawsuits brought by consumers looking to blame any and all parties associated with the creation, sales , and distribution of a product they perceive to be dangerous to the public.
Who Should Consider Purchasing a Product Liability Insurance Policy?
The important thing to keep in mind here is that no one is safe. When a lawyer looks for a responsible party in a product liability action or case, they do not limit the action to the party they believe is genuinely responsible, rather they take a “scorched earth” approach in search of the one with the deepest pockets and weakest legal defense. To do this, they name every party that might be associated with the delivery of the product to the consumer. The can include…
- The manufacturer(s) of component parts of the product
- The manufacturer, importer, or distributor of the product
- The party charged with assembly or installation of the product
- The wholesaler who provides the product to the retailer
- The retailer who transacts the sale of the product to the consumer
This means that even if you’re not genuinely responsible for loss, you could be caught up in a lawsuit as collateral damage.
What Product Liability Insurance Coverage do I Get?
Your policy will provide coverage for settlements or damages awarded by the courts up to the limit you selected for all of the above-mentioned activities. In addition, product liability insurance coverage includes the costs to defend you or your company if a law suit is brought against you by a third party. Most importantly, the costs paid to defend you are covered over and above your policy limit.
This defense coverage is crucial for any of the above mentioned businesses because the insurer has the right and duty to respond to any legal action brought against you – even if they are without merit. Without this product liability insurance coverage, the costs of simply responding to a lawsuit could be enough to cause serious financial damage to your business. Lawyers, court costs, bonds, and expert witnesses are not cheap and product liability law suits typically drag on for many years so being able to offload the financial and mental costs of responding to a lawsuit is well worth the price of admission.
The most typical claims for product liability fall in three categories:
- Defective Manufacture
- Defective Design
- Failure to Warn or Instruct
Retailers, wholesalers, distributors and manufacturers in Hong Kong are continually at risk of a product liability action just for being associated with a product available to consumers. Knowing this, it is incumbent upon business owners to transfer these risks to an insurer and get the peace of mind that comes from having an advocate on your side if the worst should happen.
Contact your Trusted Union insurance professional to learn more about this valuable coverage and get the information you need to make an informed decision about your what product liability policy is right for you.
Product Liability Insurance FAQ
How much is product liability insurance?
The price of Product Liability Insurance depends on many factors. But there are some common factors that underwriters will examine when determining how much a particular business needs to pay.
The first and most important factor is the type of product being manufactured, sold, distributed, wholesaled, etc. If your company sells ballpoint pens, expect to pay much less than a company selling pharmaceuticals or jet engine components. The higher risk the product, the more you should expect to pay.
The second factor is gross receipts. Statistically speaking, the more products you sell each year, the greater your exposure will be (there’s a greater likelihood that someone using the product will get injured). If your business is very successful and sells a lot of product, expect to pay a lot more for your product liability insurance in return.
The third major factor is geography. Some areas, like the United States, are more trigger happy with lawsuits and require higher damages to be paid. Some areas, depending on the laws, may also make it more difficult and costly for an insurance company to defend you. If you sell a ton of products in these high risk areas, expect to pay more for your insurance.
Every business is going to be different. To get an obligation-free quote on your product liability insurance, contact us.
Do you need product liability insurance?
The short answer is yes. If you are involved in the manufacture, distribution or sale of a product (or even a part or component of it), you could find yourself involved in a product liability lawsuit at some point. The general public has the legal right to sue if a defect in your product causes bodily injury or property damage.
The most classic scenario is when there is a physical defect in your product (i.e. it contained something it shouldn’t have or vice versa) that causes damage to the end user. But your business could be found liable for damages arising from a failure to include proper instructions or to properly demonstrate the product, or even a failure to provide adequate warnings about the product. As weird as it might seem, these are all things lawyers have successfully sued for.
In today’s litigious society, more and more customers are taking advantage of their legal rights and suing for product liability. Lawyers are taking a scorched earth approach suing everyone who’s even touched the product even when the blame ultimately lies with the manufacturer. To make matters worse, courts are awarding higher and higher damages – even for the most innocuous seeming damages.
To protect yourself against the crippling financial and reputational fallout from having to pay damages, you should purchase a product liability insurance policy in Hong Kong. On top of money to pay damages, the insurance company will also hire a lawyer and pay whatever legal fees are necessary to defend you in court.
Is product liability insurance included in general liability?
No it is not. A Commercial General Liability (CGL) policy is a type of 3rd party liability policy meant to protect you against people (i.e. customers, members of the general public, etc.) suing you alleging bodily injury and property damage. On top of that, many CGL policies also include coverage for personal injuries like defamation and often include a Voluntary Medical Payments clause which allows you to pay a small amount of money to someone for medical bills. This Voluntary Medical Payments clause is usually used to protect the good will of the business and to prevent unnecessary petty lawsuits.
I should also note that CGL will only cover claims stemming from 3rd parties (aka. members of the public). It will not cover claims stemming from the business owner(s), employees, etc.
While a Commercial General Liability policy is quite comprehensive and covers liability arising out of a wide range of activities on a global basis, it does not cover damages resulting from product liability. This form of liability is highly specialized and requires special underwriting before insurance companies will offer it so it is usually purchased as an add-on or as a standalone policy.
Is product liability insurance the same as public liability insurance?
While the names are similar, the coverage they offer is not exactly the same. Public Liability Insurance is a type of 3rd party liability policy that protects you against 3rd party claims alleging bodily injury or property damage. For example, if a customer slips and falls in your store and sues you, your Public Liability Insurance policy would step in to defend you in court and pay damages if you should lose.
Public Liability Insurance is commonly found alongside Commercial General Liability and the two terms are often used interchangeably to refer to the same type of “general” liability insurance policy. That said – if we were to get technical – the Commercial General Liability policy contains some coverage (i.e. personal injury and advertising injury) that the Public Liability Insurance policy does not have.
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