Product Liability Insurance

Embroker helps you get product liability insurance to protect your company against claims or lawsuits related to injury or property damage arising from defective products produced, distributed, or sold by your company.

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What Is Product Liability Insurance?

Product liability insurance transfers the risk of defects, including expenses related to product lawsuits and other claims related to faulty products.

Product liability insurance covers claims related to product defects. If your company manufactures or sells a product that has a defect and that defect causes injury or property damage, your business could be held liable.

Product liability insurance is in some ways similar to general liability insurance, but it is a unique form of insurance that is specifically designed for businesses that manufacture and sell products.

The product may be virtually any type of good sold to consumers or businesses, from basic products like food and clothing to complex products like machines and medicines. The injured third party may be virtually anyone who comes into contact with your product, including the buyer, users, or even a bystander.

Who Is It For?

If you are manufacturing products, you should consider Product liability insurance. Manufacturers are more frequently the party held liable in product liability claims. 

If your company repairs damaged products, you should consider product liability insurance as well, because there is always a chance that the injury or damage caused by the product could have been related to something that occurred as a result of your business repairing or customizing the product.

Finally, many sellers are surprised to learn that they are also liable to claims. While many states limit a seller’s liability, the claims can get complex with many parties citing blame on each other.

As such, many businesses dealing with product manufacturing, distribution, sale, or repair will not work with other companies that do not carry adequate product liability insurance. Therefore, purchasing adequate product liability insurance will likely be required at some point by your customers or partners.

Why Do Businesses Need Product Liability Insurance?

Simply put, businesses need to protect themselves from the greater risks. For even the most diligent manufacturers, product liability claims happen.

According to the United States Consumer Product Safety Commission:

  • There were an estimated 240,000 toy-related injuries treated in U.S. hospital emergency departments in 2016.
  • There were an estimated 144 unintentional non-fire CO poisoning deaths associated with consumer products in 2013.
  • There was an estimated annual average of 28,300 emergency department-treated injuries as a result of television, furniture, and appliance product instability or tip-over incidents in 2018.

What Does Product Liability Insurance Cover?

Typically, product liability claims arise from design defects, manufacturing defects, warning or use defects, and strict liability.

  • Design defects are claims related to the product issues that were present even before it was made.
  • Manufacturing defects are claims related to problems that occurred while the product was being created or assembled.
  • Warning or use defects are claims that the seller failed to provide adequate labels or warnings on risks and proper use.
  • Strict liability is a claim that is based on the absence of negligence but where injury or damage resulted from proper use.

In short, a good product liability insurance will cover you in the case of the following: product injury lawsuits, injuries related to your product suffered by bystanders, illnesses from food or beverages that were consumed, illnesses related to toxins found in your products, property damage caused by products that were defective and even wrongful death caused by your product.

What’s Not Covered?

Product liability will not cover injuries to your employees that may have occurred while manufacturing the product. This coverage will also not cover the cost of having to recall your product. The insurance type that can cover recalls is, logically, called product recall insurance.

Furthermore, product liability insurance will not cover damages to your products or lost inventory costs.

What Does Product Liability Insurance Cost?

Many factors can impact how much you spend on product liability insurance coverage. Drug companies and other businesses that manufacture medical and pharmaceutical products tend to be in the high-risk bracket and will pay considerably more for liability coverage. Products that are more likely to result in the injury of the user, such as guns or motorcycles, will also have greater liability risks and therefore face higher insurance rates.

Beyond your industry and the products you sell, the size of your company is a factor both in terms of how many employees you have, and your revenue. If your business is a huge, well-known corporation, you are going to be a bigger target for litigation than you would be as a small mom-and-pop retailer.

Your claims history will also come into play. If your company has a long history of making great products and avoiding lawsuits, your rates will likely be lower than a new company without proven manufacturing success.

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“Embroker gives you accurate and timely information with no last minute surprises. The best part is that they were able to save me a significant amount on my renewal premium.”

Giovanni Umattino

Iris Automation Inc.

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