Chances are you already know many of the ways General Liability Insurance (GL) helps your business weather unexpected lawsuits. This versatile coverage pays for legal defense fees and court-ordered compensation (up to your stated limits) when someone who doesn't work for your business sues you for…
- Bodily injuries that happened on your commercial property.
- Advertising injuries such as libel, copyright infringement, and invasion of privacy.
- Property damage caused by your business operations.
For the uninitiated, you can read more about the potential liabilities you may face in "Yes, It's Your Fault: The Scary Truth of Legal Liability" and "What Is Advertising Injury and How Does It Affect Social Media Marketing?" on our blog.
But what you may not know about General Liability coverage is that Product Liability Insurance is often included in the policy. This coverage protects businesses against claims linked to products that harmed a third party (i.e., anyone not employed by your business).
In case you're thinking about cutting Product Liability Insurance from your General Liability Insurance to reduce your premium, let's first examine the perks of keeping this coverage on hand.
The Benefits of Product Liability / Completed Products Insurance
If your business manufactures, sells, or distributes products and services, there's always the risk that you could someday be sued for product or completed operations liability.
Say, for example, you own a small contracting company, and you build a balcony for a client. If the rail gives out and the client falls and breaks a leg, they could sue for medical expenses because your business installed the product that ultimately harmed them. In this instance, you'd need Completed Operations Insurance to respond to damages that occur after you finish the project.
Product-Completed Operations Insurance ensures you won't have to pay the settlement amounts or attorney's fees out of pocket. The policy covers lawsuits when the product you created or physically sold harms someone. Potential product claims you may face include…
- Manufacturing or production flaws. How a product was produced could make it unreasonably unsafe or defective.
- Design defects. This includes claims that the design of the product is unsafe.
- Ineffective warnings or instructions. Someone could claim the product doesn't properly warn the consumer about potential risks or give adequate instructions for use.
If you need proof of the sweeping financial burdens these claims can place on a business, look no further than the time a McDonald's customer was burned by a cup of coffee or the ongoing litigation against asbestos manufacturing companies.
The damages awarded in these claims include medical costs, economic damages, and sometimes, attorneys' fees and punitive damages. (For more information about Products Liability risks, read "5 Tips for Understanding Potential Product Liability.")
Can You Afford to Cut Product Liability from Your General Liability Policy?
You can cut down your General Liability Insurance costs by foregoing Product-Completed Operations coverage. But for many professionals, offsetting potential losses is worth the extra money.
Remember, you don't have to be a manufacturing business to face these expensive claims. So long as your company participated in placing the product in the injured consumer's hands, it could be held liable for the resulting damages. That's why retailers should also carefully assess their product liability exposure.
The good news is that Products Liability coverage doesn't have to break your bank. Premiums are based on the following factors:
- Type of product.
- Volume of sales.
- Your role in the process.
To cut down on costs, be sure you accurately categorize your products and services so that you receive and pay for only the coverage you need. Different products carry different levels of risk, and you wouldn't want to be charged for the rate of insuring ladders (which have a higher potential for injury) when you sell stepstools.
Also, keep in mind that an adequate risk management plan can keep your rates low. For example, ensure the items you sell have the appropriate directions of use and warnings with them. If you own a restaurant, this may include allergen warnings on your menus.
Still unsure about your Product Liability needs and whether your General Liability policy includes the coverage? Be sure to talk to your insurance agent about your options.
This post is part of an ongoing series about saving money on business insurance. Stay tuned to learn more about how to cut your coverage costs and still keep your business adequately insured!