Unfortunately, lawsuits have become a normal part of doing business. Whether your company designs, manufactures or distributes a product, you probably need product liability insurance. Not only will a liability policy protect you against lawsuit judgments and settlements, it will also cover legal fees that result from litigation.
Product liability laws vary by state, so your coverage will as well. Because lawsuits are so prevalent, finding coverage may be a challenge, especially if your product is considered to carry high risk to the consumer.
Product liabilityIf you sell a product that harms property or consumers, you, your suppliers, wholesalers and retailers may be liable for the damages. Product liability statutes are set at the state level, but the U.S. Department of Commerce developed the Model Uniform Products Liability Act, which states can voluntarily adopt.
Cornell University Law School offers an overview of product liability.
Stream of commercePerhaps your company did not manufacture a faulty product. However, if you designed it, or supplied materials for it, or transported or sold it, your business is part of the stream of commerce and therefore potentially vulnerable to lawsuits.
Haymond Law explains who may or may not be held responsible under liability statutes.
Manufacturing flaws versus design flawsA manufacturing flaw results from the improper manufacture of a product. For instance, if food is improperly handled it may cause illness. A design flaw results from poor planning. If the product's design was faulty, but that design was manufactured according to specifications the flaw is a design issue. You can be held liable for either.
FindLaw explains manufacturing and design flaws.
Defective or insufficient warningsIf your product is dangerous but you do not properly notify the consumer with a large label or other disclaimer, you may be held liable.
Nolo has an overview of different types of product liability, including liability that arises from inadequate warnings or instructions.
Aggregate products liability limitThe aggregate products liability limit is the most your insurance provider will pay on claims while your policy is active.
Investopedia explains the concept of aggregate products liability limits and what it could mean for your business.
General liabilityProduct liability insurance is often packaged with general liability insurance. General liability insurance usually includes premises and operations coverage, which protects businesses from lawsuits resulting from an injury that occurs on their property.
Sadler & Company gives a rundown of the coverage included in its commercial general liability insurance package.