Product Liability Insurance in Action: Bodily Injury Edition
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When a product you make or sell physically hurts someone, you have to act quickly. The Product Liability coverage in your General Liability Insurance can help cover the cost of a product liability claim over bodily injuries, but it's not going to do the legwork of:

You have to complete these steps if you want the best shot at defending your business. Before we get into that in more detail, let's discuss when a physical injury is an incident Product Liability Insurance can address.

When Is a Bodily Injury a Product Liability Claim?

A bodily injury is pretty much what it sounds like. It's a legal term that means physical damage to any part of a person's body. That seems simple enough. If a person tears their ACL falling off a ladder, they've suffered a bodily injury.

Things get a big trickier when a bodily injury is caused by a consumer good. For example, if someone fell off the ladder because it failed to lock and collapsed, then the bodily injury could be a product liability issue, so long as one of these three statements is true:

  • A mistake was made in the ladder's design. A defect in design must be there from the get-go. Perhaps the designer made a ladder that could only hold a small child. Maybe they forgot to design a lock system to keep the legs in place. Either way, those could constitute defective design, making the designer potentially liable for the resulting bodily injury.
  • A mistake was made when the ladder was manufactured. Manufacturing defects are flaws that occur when the ladder was made. That includes any errors that happen while manufacturing and assembling the product or while choosing the product's materials.
  • A mistake was made in the instructions or safety labels. Did the ladder need a warning limiting use to people who weigh less than 200 pounds? Are the locking instructions unclear? The retailer, manufacturer, or distributor can be liable for injuries if they fail to warn consumers about potential dangers.

Because mistakes can happen at any point in the distribution chain, any party in the chain can be held responsible for injuries caused by a defective product. Some states even have strict liability laws that make it easier for a plaintiff to win their suit. In those states, you can be liable for bodily injuries even if you did everything in your power to minimize the chance of defects. Learn more about these laws in "How Strict Liability Laws Affect Small Businesses."

What Can I Do If a Customer Files a Bodily Injury Claim against My Business?

Step 1: When you receive a bodily injury complaint, get in touch with your General Liability provider right away. Your General Liability policy can cover third-party injuries on your property (e.g., a slip-and-fall accident), and if it has Product Liability coverage, it can also cover bodily injuries caused by the products you make or sell.

The takeaway: So long as someone who isn't your employee gives you notice about a bodily injury that your business may have caused, you must call your General Liability provider so it can start investigating the claim.

Step 2: If you get a product liability lawsuit notice, call the US Consumer Product Safety Commission (CPSC). According to "Duty to Report to CPSC: Right & Responsibilities of Businesses," manufacturers, importers, distributors, and retailers are obligated to report certain types of lawsuits, but they're also obligated to report products that are potentially defective, inherently risky, or noncompliant.

The takeaway: Contacting the CPSC immediately may save you hefty fines, but the CPSC may also find ways to help you reduce the likelihood of a recall. Get more details in "Should Your Business Purchase Product Recall Insurance?"

Step 3: Figure out what went wrong and when. Identifying which step in the process is the source of the defect can help you determine your business's exposure.

The takeaway: Even if your business isn't the reason for your customer's bodily injury, you can use the information to decide your next move. Get more tips for defending your business in "Product Liability Insurance in Action: Lawsuit Edition."

Product Liability Insurance: Further Reading