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A Guide to Product Liability Insurance

If your business sells or manufactures a product, you may understand the risks that arise while selling such goods to customers. Errors may occur while production, resulting in your business selling unsatisfactory products. These mistakes may be something as small as a different color, or as serious as an injury-causing flaw. In order to protect against lawsuits that arise from such errors, businesses are recommended to examine whether product liability insurance is right for them.

Product liability insurance is a type of insurance that is commonly obtained by manufacturers, distributors, retailers, and any party that produces and sells a tangible product.  Without protection, a lawsuit can greatly harm the company, even causing it to go out of business. Therefore, it is recommended that businesses look into whether product liability insurance will protect their assets, employees and reputation.

Why Choose Product Liability Insurance?

In certain industries, businesses are required to purchase product liability insurance. However, any business that manufactures or sells products should consider this type of insurance. Without product liability insurance, the damages that results from a lawsuit can be quite extensive. Lawsuits can take weeks or even months to settle, causing the business to waste valuable time. When the dust settles, the guilty party may be required to pay a number of costs as recompensation, ranging from medical fees, punitive damages and the costs of the attorneys. In addition, companies must also consider the damage to reputation that arises from a negligence lawsuit. A lawsuit can damage the company’s reputation, and cause the target audience to lose faith in the products or goods. Given these risks, product liability insurance can seem like a wise investment.

What to Know about Product Liability Insurance

Generally, there are three types of product liability claims that a party can face:

Manufacturing Defect:
Oftentimes the most obvious type of defect, a manufacturing defect involves a flaw while creating the product. In general, a flaw is made in a single item, rather than in an entire line of products. An example of a manufacturing defect is a car with malfunctioning breaks.

Design Defect:
These claims focus on a inherently dangerous flaw in the design of the product. This claim does not arise from a single error in a product, but a whole line of products, and can possess a flaw that poses injury to the consumer. Examples of design defects include an electrical device that causes shortages and a deep fat cornball fryer that possesses a burn hazard.

Marketing Defect:
Also known as the failure to warn, a marketing defect occurs when a company fails to provide sufficient instructions on the proper use of a product. Lawsuits involving this case generally occur, when the client sustains damage while improperly handing the item. Regardless of whether the use of a product is obvious or not, third parties are able to claim marketing defects. Examples of marketing defects include the lack of instructions for use of an appliance, or the lack of a label warning that contents are hot.