Product defect insurance

Product defect insurance, also called product liability insurance, protects you against claims of defective products manufactured, distributed, or sold by your small business that cause third-party injuries and property damage.

Most commercial general liability (CGL) policies include product liability coverage, helping you to recover from product defect claims and other expensive product liability lawsuits.

If a product you make, sell, or distribute causes bodily injury or property damage to a third party, product defect insurance will cover expenses such as:

• Medical costs, including urgent care visits
• Property damage repair and replacement costs
• Legal expenses, such as attorney's fees, settlements, and judgments

If your product is recalled after a customer is hurt, product liability insurance will help cover the cost of a lawsuit. However, most standard product liability policies don't cover the cost of recalling a product.

Product recall insurance can be added as an endorsement or rider to your general liability policy. This will cover costs for:

• Collecting recalled products
• Disposing of unsafe products
• Hiring crisis management and public relations services

When your business centers around goods, a defective product can harm customers, damage your reputation, and ruin your company's finances. Product liability insurance protects you against defective product claims, which typically fall into one of three categories:

Poor design can make a product unsafe before it's even manufactured. If someone suspects that your product has a design defect, they must:

• Prove they used the product correctly
• Show how the design flaw caused damage
• Identify the design flaw

Some states also ask the user to present a reasonable, affordable, and functional alternative to the flawed design.

Since design flaws can affect an entire product line, defect lawsuits can be costly, making a product liability policy critical for businesses that design products.

For example, a trucking company notices that a certain model of vehicle often rolls over on sharp corners. It discovers that the model has a design flaw that makes the vehicle top-heavy, leading to a lawsuit that the automaker's product defect insurance will cover.

If the manufacturer deviates from the product design, uses the wrong parts, assembles the product incorrectly, or allows hazardous materials to contaminate the product, the product may be defective and unsafe for consumer use. Even businesses with thorough quality control processes don't always catch manufacturing defects, making insurance a much-needed safety net.

Let's say a skincare product causes rashes in a handful of customers. These customers sue the skincare brand, which soon discovers that a batch of products from a specific assembly plant was contaminated with allergens. The skincare brand and manufacturer pay for legal fees and damages with product liability insurance.

A marketing defect occurs when insufficient instructions, improper labels, or inadequate warnings cause user error and injury. This type of product defect is also called a failure to warn. These claims can be easy to overlook, since even a tiny typo in labeling or instructions can expose your business to a lawsuit.

If someone suspects that your product has a marketing defect, they need to identify the flaw and show how it led to damage.

For instance, a customer incorrectly assembles a couch based on an error in the assembly instructions. When the couch collapses, the customer files a lawsuit against the furniture company. The furniture company's product liability insurance covers legal fees and damages.

Any business involved in bringing a product to market can be sued for product liability, including:

• Designers
• Manufacturers
• Wholesalers and distributors
• Retailers

Although all businesses in the supply chain should have coverage, the party that bears responsibility for any claims will depend on the type of product and what caused the defect. Even if your business wasn't responsible, you can still be held legally and financially accountable.

If your business manufactures, distributes, or sells physical goods, product defect insurance is highly recommended. The term product touches a wide range of items, including:

• Food and beverages
• Cosmetics
• Real estate
• Electronics and machinery
• Pharmaceuticals and medical devices

While this list includes the most commonly covered product categories, product liability insurance is important for any business involved in the supply chain.

Product liability coverage is often included in general liability insurance. Complete Insureon's easy online application today to compare quotes for affordable business insurance policies from top-rated U.S. companies.

Once you find the right policy for your small business, you can begin coverage and receive your certificate of insurance (COI) in less than 24 hours.