Insureon Blog

What Is Product Liability Insurance?

9. December 2013 10:13

Car accident damage

Perhaps you've heard the term "Product Liability" mentioned in passing, but don't know for sure whether it's a policy you need for your business. First things first: Product Liability Insurance protects small businesses from lawsuits alleging that a product caused bodily harm or financial loss to a consumer. A common misconception is that only manufacturers need to worry about these types of lawsuits, but that's not the case — if you profit from a product's sale, you're at risk.

Take, for example, the example of a car dealership in Louisiana that was sued by a customer who purchased a Chevy Malibu with frozen power steering. The malfunction caused the plaintiff, Christopher Swartz, to get into multiple accidents, so he's suing both the dealer he purchased the car from and the manufacturer, General Motors, because both profited from his purchase. This is a good example of the type of case that could befall any small business — not just car dealerships and well-known manufacturers.

If you sell or manufacture products that can cause bodily harm to a consumer (electronics, apparel, food items, medicine), then you're at risk for the types of lawsuits Product Liability Insurance protects against. Potential suits include claims of failure to provide warnings or proper instructions, flaws in the manufacturing process, and flaws in the design of the product.

For in-depth information about Product Liability Insurance, check out our blog post, "5 Tips for Understanding Potential Product Liability."

How Can I Prevent Product Liability Scenarios From Hurting My Business?

It's true that Product Liability lawsuits are difficult to prevent — especially as a seller, your options are limited. But even as a manufacturer, you can feel helpless once your product is out of your hands and in customers'. Consider the following points in preventing Product Liability lawsuits:

protect your assets


Insurance Terms Explained | Manufacturers | Product Liability | Retail | Small Business Risk Management

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