When it comes to your business, you likely face many different risks on a daily basis. Ranging from your standard business risks like competitive risks and economic risks, to insurable risks like fire, crime or liability. Common liability exposures faced by most businesses include: premises & operations like slip and falls, product liability, personal injury, or incidental medical malpractice exposures.
Most business can effectively hedge against insurable risks by purchasing a Commercial General Liability policy which protects against common liability losses like slip and falls or claims by 3rd parties for injury or property damage also includes some coverage for product liability.
That being said, businesses with more specialized risk exposures, or that don’t require other protections, could benefit from more specialized policies such as a Product Liability Insurance (PLI) policy.
What is Product Liability Insurance and what does it cover?
Product Liability Insurance protects businesses in the event that some defect in their product causes bodily injury or property damage to a 3rd party while away from the premises. If the loss occurred while on premises, it would be considered a premises & operations liability.
This type of liability can arise due to the unsafe manufacturing, construction, assembly or design of your product (including its packaging) or if you have failed to provide adequate instructions for use or warnings about any dangers that can occur due to the use of that product.
If you are sued for this type of liability, your insurance company would pay for your defense in addition to whatever judgement is made against your business subject to your chosen limit of insurance. On top of this, many insurance companies also add coverage for costs involved in recalling defective products.
Do I need this?
Historically, product liability lawsuits have routinely commanded the largest judgements. Whether you need this type of insurance or not depends on what type of business you operate. If you are a service-based business that doesn’t sell or handle any products, this type of coverage would not be right for you.
However, if you manufacture, distribute, retail, or repair any products, you will likely want this coverage. Many business owners believe that because they don’t manufacture any products, they do not need this type of insurance as any blame could be shifted to the manufacturer. While this might ultimately be the case, dealing with a lawsuit can still be costly and there is no guarantee that you will succeed. Most of the time, plaintiffs will simply sue everyone that has touched the product in the hopes of finding one with the ‘deepest pockets’ in a ‘scorched earth’ strategy.
Considering the impact a big lawsuit against your business would have on operations and profitability, it is imperative that business owners protect themselves via insurance. This is not a cost that can be economically retained by the business and must be transferred.
Another point to consider is your ability to win business. Most of the time, a retailer won’t take on a supplier that does not carry a liability policy. From this perspective, a PLI policy is an investment.
How much does it cost?
Because these policies are so specialized, costs depend on a myriad of factors that the underwriter will look at to determine risk levels. Some of these factors include coverage limits, claims history, company value or annual revenues, and the type of business you operate because selling pens is lower risk than selling pharmaceuticals.
For a more detailed quote, contact us.