Product liability is a line of coverage included under Commercial General Liability Insurance. Anyone who plans to operate a small business, and even those operating as home-based businesses, must also plan to have General Liability coverage. A liability policy provides for defense and damages if an owner, their employees or their products or services are alleged to have caused injury or damage. The moment small business owners open their doors to the public, they open themselves up to the potential for liability claims.
Product Liability and The Distribution Chain
The history of product liability is an ongoing practice of learning how defective products cause physical injury or property damage to third parties. While there may be foresight in the design and manufacture of a product, sometimes it is not until a product ends up in the hands of a consumer that a defect is discovered. Responsibility for defective products my lie with all those parties included within the distribution chain depending on your state’s innocent seller statute.
Among these potentially liable parties are:
A consumer product liability claims can only arise from the sale of the product in the marketplace. The party need not necessarily be injured by the product to seek relief. If the product was sold to individual and is defective, anyone who purchased the product may be able to seek recovery.
Expecting the Unexpected
Given the years of experience in the field of manufacturing and underwriting to help mitigate potential losses resulting from defects, we now have laws requiring that products must meet with the ordinary expectations of the consumer. While all possible outcomes cannot necessarily be anticipated, there is some assurance that enough research and development has reduced damage or injury from an unexpected defect or danger.
There are products by their nature that present a danger. For these products, the manufacturer is obliged to issue warnings of how to properly and safely use them. Such items might include knives or power tools, as an example. We are all aware of some manufacturers who take the risk of claims in stride as a cost of doing business. Whatever the scenario, product liability cases can be complex requiring the participation of experts.
Managing Exposure is Smart Business
Small business owners are in a better position to face product liability claims with the help of an experienced commercial law attorney. As attorney Jose Bautista explains, “A product defect is difficult to determine.” Small business owners facing a product liability claim are in a better position to defend themselves when relying on the expertise of an attorney with the knowledge gained from specializing in a chosen field.
As there is no federal product liability law, these claims fall under the jurisdiction of state laws following the theories of negligence, strict liability and breach of warranty. The intention of product liability law is to minimize risk to the public. In hopes of promoting safer products in the marketplace, a individual who is injured may be able to recover the following damages:
A small business or manufacturer needs to verify through an attorney that all of the above damages are covered under their General Commercial Liability Policy or Umbrella Policy.
As Business Expands, So Can Exposure
Without sufficient coverage designed to limit exposure, the small business owner could easily face the end of their business due to such expenses. If the small business owner plans to export products, there is further exposure to liability claims. This presents a greater risk of liability as issues related to transportation, handling and storage are introduced. The “full faith and credit” agreement between industrialized nations applies worldwide, and allows judgments to cross international boundaries.
With so much riding on the potential for bodily injury or property damage to result from unforeseen product defects, it is reasonable to consult with knowledgeable people. From the small business owner to the insurance expert to the attorney in the event of defending a claim, each of these is their own specialist. Trusting the experts rather than trying to go it alone just makes smart business sense.