Manufacturers, retailers, and suppliers all share a scary business risk: wrongful death.
Defective products can lead to serious injuries, and ultimately, the death of one of your customers. Accidents like these are tragic and can be devastating for a small-business owner.
While it may see callous to talk about wrongful death from a product liability perspective, we have to consider it. If a customer was killed by one of your products, what would this mean for your business?
A wrongful death lawsuit could have a huge impact on your business in direct and indirect ways:
- You may have substantial legal costs.
- You may face horrible publicity.
- You may need to recall the product that lead to the wrongful death.
These circumstances and more come with significant costs that your small business insurance – namely Product Liability Insurance – can help shield you from. Let's look how your insurance can protect you from wrongful death lawsuits.
Product Liability Insurance: Wrongful Death Coverage for Small-Business Owners
Say you're a manufacturer that makes bicycle seats. Unbeknownst, your supplier switches materials and you end up using a lower-quality metal that snaps more easily. You're sued in a wrongful death lawsuit when a cyclist dies after their seat post snaps and they’re thrown through the air into traffic.
In a wrongful death lawsuit, you may have to pay three kinds of damages:
- Economic damages, for lost earning potential of the deceased.
- Non-economic damages, for the pain and suffering of the victim's family.
- Punitive damages, if the court decides to levy penalties on you.
Your Product Liability Insurance may cover each of these. However, it's worth noting that some Product Liability policies don't cover punitive / statutory damages. Some policies may also cap the level amount of punitive damages they'll cover.
According to Nolo.com’s entry on wrongful death law, punitive damages are generally levied when a manufacturer has been extremely reckless.
As we covered "Product Liability & Wrongful Death: A Primer for Small Businesses," Ford Motor Company had to pay punitive damages when it put the exceptionally dangerous 1972 Pinto on the market. The car's rear gas tank exploded when rear-ended. In the court's eyes, the carmaker was reckless and overlooked serious safety issues when producing the vehicle.
Check with your insurance agent if punitive damages are covered in your policy. Even if they’re not, remember that these damages are typically only imposed in the most reckless of wrongful death cases.
Product Liability Insurance & Legal Bills: What's Covered?
Product Liability Insurance can help cover the damages you're sued for in a wrongful death case, and it can also pay for the other costs of a lawsuit, including…
- Attorney fees.
- Expert witnesses expenses.
- Court costs.
Understandably, these costs will add up. For a tragic wrongful death case, the financial hit and damage to a business's reputation could be enough to put many companies out of commission.
How to Get Product Liability Insurance
Product Liability Insurance is typically included with General Liability Insurance. GL coverage provides basic lawsuit protection for small businesses over third-party lawsuits concerning…
- Bodily injury.
- Property damage.
- Advertising injury.
In addition to wrongful death and product liability issues, small-business owners get basic coverage for common business liabilities.
Interested in obtaining General Liability Insurance and Product Liability Insurance? See our resources on the cost of General Liability Insurance for small businesses.