Lawsuits about defective products often become public ordeals that demand a considerable amount of money, time, and reputation rebuilding efforts. Products liability insurance provides a safety net for companies of all sizes regarding the possibilities of claims and litigation caused by defective products.
Who Needs Products Liability Insurance
Any company that designs, manufactures, distributes, or sells a product can benefit from this insurance policy. This is because liability claims can be filed against all businesses involved in the whole production and distribution chain.
Some examples of everyday commodities that are highly susceptible to greater scrutiny include food products, electronic devices, and automobiles. Food production is tricky since any adverse reaction by whoever eats them can increase the likelihood of complaints and possible lawsuits. On the other hand, makers of electronic devices can easily experience backlash over faulty phones and computers since most people rely on them daily. Meanwhile, car manufacturers and dealers can face severe repercussions for any defects that might cause accidents or even death on the road.
Why Purchase a Liability Insurance
Defective products can cause income losses, physical injuries, and property damage, all of which are grounds for costly legal action. So, as long as you’re part of the distribution chain, you can be held liable and will need to pay for lawyers and possibly cash settlements. Back in 2016, an average of $7.07 million in damages was paid by companies, with legal fees costing around $1 million.
The exorbitant legal and settlement fees are enough to cause financial turmoil within the business structure, and in worst cases, bankruptcy. Liability insurance policies can cover these costs so that your companies wouldn’t have to outright pay for everything. Product liability insurance allows claims from the following circumstances:
- Manufacturing defect. Products with missing parts, questionable materials, and assembly issues. Examples: Discoloration, dents, missing components
- Design defect. The intended final product’s design is ineffective or damaging. Examples: Easily bent device frame, slippery shoes, short-battery life
- Marketing defect. Having incomplete operating instructions, incomplete warnings, and misleading advertising. Examples: Claiming a product is water-proof when it’s only water-resistant and incomplete food ingredients list.
Where to Buy Your Insurance Policy
Get in touch with our professional staff at Nicholson Insurance. Our team can guide you through customizing your policies based on your company’s needs. Start protecting your companies today with our business insurance policies.