Product Liability Insurance and Your Small Business

Product Liability

Each and every year, thousands of people are injured using products that they have purchased.  This can be a result of the products being defective, having inadequate instructions, or not having warning labels on the packaging.  If injured by a product, the consumer may end up with costly medical bills, as well as lost income as a result of missed work.

 Who’s Responsible? 

When you bring a product to market, whether you are a manufacturer, importer, or a retailer, you are responsible for that product being safe to use for its intended purpose.  If it is defective, even by no fault of your own, you may be legally responsible for any damages resulting from a consumer using that product.  Damages can include medical expenses, loss of income, pain and suffering, punitive damages, and attorney’s fees.  

 Costly Lawsuits

If someone is injured by your product, they may seek legal action, which can be a huge cost to your business.  As is often the case with defective products lawsuits, there can be several people who were injured as a result of your product and can band together and file a class-action lawsuit, which is lengthy process and can result in million dollar judgments against your company.  According to Mondaq, a 17-year study revealed that 22.4% of all Australian class actions lawsuits have been product liability related, and with wider consumer awareness and a rise in activity by the ACCC, the Australian Competition and Consumer Commission, these numbers are only likely to rise.

Small businesses are particularly vulnerable to litigation and even a minor judgment can be in the tens of thousands, which can cause a business to file bankruptcy or go under altogether.

 What You Can Do

By using responsible business practices, you may be able to reduce the risk of product liability lawsuits:

  • Perform routine reviews of designs and production of products.
  • Make sure strict Quality Control policies are in place and are being followed.
  • Regularly test products.
  • Make sure any marketing provides a true representation of the product and its uses.
  • Make sure all instructions are clear and that any necessary warning labels are prominently displayed on the packaging.
  • If a product is deemed defective or unsafe, voluntarily recall it quickly.

It’s also important for your company to have sufficient insurance that includes Product Liability Insurance coverage.  A large company may be able to survive a big lawsuit, but most small businesses have thin profit margins and could not afford to pay out even a small judgment.  Product Liability Insurance works with your Public Liability coverage to make sure your company is covered for claims against product liability, specifically against litigation resulting from damages from a product you produce, import, or sell.

As with any business, your risks are unique.  A medical supply company would have a greater liability risk than a company that manufactures paper napkins.  A car company is at greater risk than a company that sells cotton balls.  With Product Liability Insurance designed for your kind of business, you can have peace of mind in knowing that your company is protected and can focus on building your company.  Call PSC Direct today to find out how the right Product Liability Insurance could protect your company.