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Product Liability

Product Liability Insurance


Product Liability Insurance — protection against financial loss arising out of the legal liability incurred by an insured because of injury or damage resulting from the use of a covered product or out of the liability incurred by a contractor after a job is completed (completed operations cover). 


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No business owner ever knows when a product may fail. However, a good businessperson understands that product failures, recalls, and defects happen, and takes the necessary preventive measures to protect the business.

Typically, as demand for a business’s product increases, the ability to quality-assure every single product that you sell to your customer decreases along with it.

For example, while you may be able to inspect every single piece of clothing when you were first starting out your baby attire business, as your business grows and you begin to outsource manufacturing and production, you will inevitably run into the inability to assure every single item yourself. In this example, perhaps a button on one of your thousands of items was not secured properly, thereby posing a choking hazard to children.

Of course, you can conduct quality assurance; however, there is no way to truly guarantee that every single product coming off the assembly line will be error-free, especially as you try to scale your business. Luckily, this is where Product Liability Insurance comes in.



What is Product Liability Insurance?

Product Liability Insurance is a form of general liability insurance meant to protect your business from acquiring financial and legal risk because of the quality of your business’s sold goods or products. Product Liability Insurance covers the legal and court costs of defending any claims of bodily injury, property damage, or financial losses caused by your product.

Product Liability Insurance is a way of protecting your business from financial loss due to legal and court costs brought on by a potential suit by one of your customers. Say a customer alleged that a baby romper you sold her caused her child to choke. You could be looking at a serious legal charge against you and your business, one that may end up sapping all the money and resources out of your business.

Situations that are typically covered by Product Liability Insurance may include:

  • A customer harms herself because of the faulty packaging on one of your products

  • A drapery set that a customer purchased from your business was highly flammable and caught on fire, eventually damaging her entire kitchen

  • A customer with a severe allergy finds trace amounts of tree nuts in your homemade gourmet muffins

  • A homemade house cleaner that you sell damaged one of your customer’s entire hardwood floor

  • A customer becomes sick with food poisoning after eating old shellfish at your restaurant, goes to the hospital, and incurs medical costs caused by your contaminated food products

  • A customer’s pet becomes ill from ingesting some lining in a pet toy product that you sell

These are some of the instances where Product Liability Insurance may be able to protect you and your business from shelling out thousands, if not millions, of dollars in litigation, arbitration, or legal costs.


Do I Need Product Liability Insurance?

If your business sells any goods or products to the general public, it is absolutely necessary for you to consider Product Liability Insurance. There is no guarantee that any of your products will not cause harm to a customer or their property. Even if you are certain of the quality of your products, a dissatisfied customer may very well be able to wage a long and expensive legal battle against you and your company that may deplete you of your time, money, and resources—even if you were to win the case. It is important to note that product liability cases are among the most expensive to litigate.

Product Liability Insurance makes sense to consider for any financially responsible business owner. When you put your products in the hands of your customers, you never know what may happen. Product Liability Insurance gives you the peace of mind that if anything were to occur, you would have a formidable safety net to fall back upon.

Some examples of small businesses that could use Product Liability Insurance are:

  • Restaurants, bakeries, cafes, food distributors

  • Clothing/apparel sellers

  • Children Stores: Toys, Clothing, Accessories, Gear

  • Pet stores

  • Businesses that sell appliances

  • Beauty/fragrance sellers

  • Home Improvement Suppliers

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