What is 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.