Buy Product Liability Insurance
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.
buy product liability insurance
A preferred product liability policy should cover a wide array of costs stemming from product-related claims, including the following: the cost of getting rid of your defective products, the cost of replacing defective products, business disruption and business costs, and fees potentially owed to retailers or wholesalers.
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.
Product liability insurance responds specifically to claims that are related to the use of products that your company sells, manufactures, or distributes. On the other hand, a general liability policy will cover claims that are related to the complete operations of your business.
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.
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.
Simply put, businesses need to protect themselves from the greater risks. For even the most diligent manufacturers, product liability claims happen. Product liability insurance covers product-related claims of product defects, product failures, and product-related personal injury.
Illness: For example, you own a grocery store that sold someone cheese that was expired, which caused the person to become ill after eating it. Product liability protects you from these types of claims too.
Wrongful Death: To use the first example again, say your company sells a forklift that malfunctions, which leads to an accident that ends in death. In such a case, your product liability insurance can cover not just legal costs, but also burial costs and other expenses related to the death caused by your faulty product.
Third-Party Accidents: As we already mentioned, if a customer or partner is injured on your property, that is something that would be covered by a general liability insurance policy, not by product liability insurance.
Product Recall Costs: A separate insurance product called product recall insurance covers the costs of recalling a defective product. This is often added as an endorsement to a product liability policy but is rarely included in one without the endorsement.
Technology Products: Product insurance will not cover lawsuits related to technology products. A technology error & omissions policy is what software companies and other technology companies purchase to protect themselves from claims related to mistakes made when creating software products that caused ended up causing damage to third parties.
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. For more factors, read our entire article on product liability insurance cost.
Of course, employee training is also very important in this process, since the quality of their work is often a deciding factor in the quality of your products. Also, if you are working with partners who manufacture, distribute, or sell your product, make sure that you are working with trusted companies that are also well insured.
Most companies will be able to simply add a product liability endorsement to their general liability policy since only larger companies truly have a need to purchase an independent product liability policy to cover very specific coverage needs.
Since it is usually bought with a general liability policy, another good way of saving on this coverage is by bundling the general liability policy and purchasing it as part of a business owners policy (BOP).
Farming centers around the production of food (a product that people ingest), making it important to consider what you are raising or growing and how it is sold to determine if you need to manage your production and marketing risk. Product liability insurance provides protection if a food borne illness results from a product you sold. It will pay for injuries and medical treatment resulting from consumption of your product. In addition to addressing the needs of your customers, this coverage will also pay your defense costs in a lawsuit, and any judgments of the court, up to the policy limit.
If you have reviewed your farm owner's insurance document, you know that in most cases a limited amount of product liability insurance is included in that coverage. However, there are several different types of production and marketing activities that farmers may pursue that require additional insurance:
Increasing demand for locally grown foods has encouraged many farmers to set up roadside stands, on-farm markets, or stands at a community farmer's market. Consumer research shows that a majority of people who buy direct from the producer believe that the food is safe for their families - and for the most part, their belief is correct. However, incidents that have been nationally reported, such as spinach that contains E. coli or melons with listeria, serve as examples that the unexpected can, and does, happen. Many farmers' markets are now requiring product liability insurance in the amount of over $500,000. This type of coverage protects both whoever markets your product and your own business, in the event someone becomes ill due to a product you sold. The marketing entity will be named on the insurance policy along with your farm, so that everyone's risk is effectively managed.
Many consumers look for restaurants or family-owned groceries that carry locally produced foods, resulting in wholesale marketing opportunities for small- and medium-sized farms. If you sell to restaurants or a local grocery store, you will need product liability insurance, because if a customer becomes ill after eating a meal that includes your product, you will likely be named as a co-defendant with the retail establishment in any resulting lawsuit. You may find that many chefs and purchasing agents will be interested in the production and harvesting methods used on your farm (perhaps requiring Good Agricultural Practices/Good Handling Practices (GAPs/GHPs) certification to increase food safety - but even such certification does not negate the need for insurance.
Adding value to your farm products may be as simple as cutting a melon into slices or as detailed as making jam from your berries. Because cutting, mixing or cooking agricultural products beyond their natural state introduces the opportunity for biological, chemical or physical hazards, adding value will trigger the need for a higher level of protection. Farmers who add value through a limited food enterprise (also known as a home based food business) need to insure their home kitchen separately from the rest of the farm, as well as getting product liability insurance for the resulting food items. If you make your value-added items in a shared community kitchen, you will have to purchase product liability insurance, including the kitchen entity as an "added named insured" on your policy. Some agricultural producers take their products to a co-packer who makes private-label foods for the farm to sell. If you plan to do this, it is wise to explore with your insurance provider whether the co-packer's product liability insurance is adequate, or if you should have your own coverage (since the foods will bear your farm or business name).
You will be required to show the company sales records indicating the volume of production, or products you have sold. If this is your first season direct marketing or you are just beginning to make your value-added product, you may need to estimate this figure. Estimating on the higher end of your planned sales is a good strategy to be sure you have adequate protection. If you have past sales records, you should take into account any increases in planned production, or prices.
You need to describe all product(s) that you sell or are planning to sell. You may also be required to describe your production practices (such as GAPs/GHPs certification or whether you use organic or conventional methods). If you are direct marketing only agricultural products in their natural state (such as whole heads of lettuce, versus a salad mix) you still have risk exposure. However, if you are selling processed products (either your own or purchased) you will have additional liability, as discussed above. It is in your best interest to include everything you sell or plan to sell in your description. Because the food safety regulations/expectations change on a regular basis and your list of products may change, as well, this will be one area that is revaluated each year when the policy is renewed. 041b061a72