Product Liability Insurance

Under the Consumer Protection Act 1987, if you design, manufacture or supply a product, you are legally responsible for any injury or damage that it may cause. Because of this and similar laws, businesses rely of product liability insurance to protect themselves.

The seller is often the first target in the line of fire when a consumer experiences damage, harm or loss as the result of a faulty product. Product liability insurance will cover the seller in the event that they are found liable of a product defect and must compensate the injured party. This is subject to certain restrictions, but the basis for product liability insurance is to guard the seller or manufacturer against circumstances that may be unforeseen such as a fault in a product that quality control was unable to trace.

It should be noted, though, that the manufacture of a faulty or inferior product is not covered by product liability insurance. Shoddy workmanship is not covered and may even lead to the inability to obtain or keep insurance. It will most likely result in the inability to file a claim.

Prior to issuing a policy for product liability insurance, the insurance company will require that the following criteria are met:

* The manufacturing or services are conducted according to industry best practices
* The staff is adequately trained
* The equipment and systems are up to date, appropriate and well maintained

When these criteria are met, then a product liability insurance policy is usually issued and coverage begins.

The laws differ with each state, but the majority of he states do have some form of supplier liability laws on the books. This means that if a person claims that they incurred damage or harm from a product but are unable to sue the manufacturer because the manufacturer can not be sued, is unable to enforce a judgment or the manufacturer is bankrupt, then the person can go after the supplier as if they were the manufacturer. The supplier could be a store, an individual, a convenience store, a business or any entity that supplies or sells the product.

Any business that sells products that are manufactured overseas should get a good product liability policy. This is because most manufacturers in other countries are only subject to the laws of their own country or state. This means that a Chinese manufacturer is not likely subject to the laws of, say, California. This would make it virtually impossible for the injured party to enforce a judgment on the Chinese manufacturer. In that case, the liability could very easily be placed on the seller or distributor of the product. Product liability insurance covers businesses and individuals against this type of risk and protects them.

If you are the seller or distributor of a product, it would be a wise move to take a good look at your current product liability insurance policy to make sure that you are adequately covered. If you do not have product liability insurance, then it may be a good idea to obtain a policy. You want to make sure that you are covered in the event that a product that you sell causes injury to someone. To not have product liability insurance is a risk that is not worth taking.

This site is for informational purposes only and does not replace professional advise.
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