What is Product Liability Insurance?

Does your company manufacture or sell products or other goods to the general public? If so, you likely need product liability insurance.

Product liability insurance covers a business’s financial responsibility for losses or injuries to a user, buyer or bystander caused by a defect or malfunction of the product. In some instances, product liability insurance may also cover the manufacturer or seller of the product for defective design and “failure to warn.”

Claims against companies for product-related damages are usually related to manufacturing or production flaws, design defects or defective warnings or instructions. Claimants may be awarded payouts for medical costs, compensatory damages, economic damages, attorney fees and court costs, and even punitive damages. Consider the impact these costs would have on your business if you did not have insurance coverage. “Devastating” is the only appropriate description.

It is not just manufacturers who need product liability insurance. Any company that participated in bringing the faulty product to market can be included in a lawsuit and held liable for damages to the user. Thus, if your company makes or sells any products to the public, you need some type of product liability coverage.

Some product liability insurance is usually included in standard commercial general liability (CGL) policies or even business owners policies (BOPs), but never assume that the coverage is sufficient. What’s more, CGL policies or BOPs will likely only cover part of the potential damages that you could be held responsible for (e.g., coverage is only for economic damages, but not punitive damages).

Keep in mind that some products come with more potential exposures to liability claims than others, and therefore the amount of product liability insurance needed by your business will depend upon the products you sell, the volume of sales, and where your organization fits in the chain of commerce (manufacturer, wholesaler, retailer, etc.).

We can work closely with you to determine how much product liability coverage is included in your CGL policy, and if you need more comprehensive coverage.