Why manufacturers and retailers need product liability insurance.
Companies that make and sell goods are, not surprisingly, often the target of product liability lawsuits.
Manufacturers: A manufacturing defect might slip through quality control, a product may cause injury if used improperly, or a consumer might experience an allergic reaction. No matter how diligent you are, things can and do go wrong. When they do, product liability insurance acts as a financial shield, covering legal fees, settlements, and damage awards—so your business isn’t left shouldering the burden alone.
Retailers: Sellers, in particular, may assume they are insulated from liability because they don’t manufacture the products they sell. However, this is far from the truth. If a defective product on your shelves injures a customer or damages their property, your business can still be held responsible – even if you had no role in its design or production. This is where product liability insurance becomes indispensable. It covers the costs of defending your business in court, including attorney fees, expert witness costs, and potential settlements. For small business owners, these expenses can become overwhelming, especially if a lawsuit drags on for months or even years. Having the right insurance ensures that a single claim won’t jeopardize your company’s financial stability.
Defective products can cause catastrophic injuries, leading to extensive litigation and significant financial consequences, especially for underinsured businesses. Legal fees, prolonged litigation and substantial verdicts can have a lasting impact. If your business loses a lawsuit, the financial repercussions can be severe.
For small businesses already operating with limited resources, these risks can feel overwhelming. When you're liable, you're liable – there’s no getting around that. That’s why running your business with integrity and prioritizing consumer safety is crucial. Securing the right insurance coverage is a key part of that responsibility. With proper product liability insurance in place, your business is protected from catastrophic financial consequences, ensuring that legal claims and settlements don’t derail your success.
In many states, retailers can be held just as liable for a defective product as the manufacturer itself. To protect your business, consult a knowledgeable broker and ensure you have the right coverage.
Why small businesses need to think about product liability insurance
One of the biggest challenges small business owners face is the disparity in legal and financial resources compared to larger corporations. Big companies have entire legal departments and deep pockets to defend themselves against lawsuits, while small businesses often operate with limited budgets and smaller teams. Product liability insurance helps level the playing field, providing access to the necessary resources to handle legal disputes effectively. It ensures that small businesses are not left vulnerable to potentially ruinous claims and can continue operating despite legal setbacks.
Beyond financial protection, product liability insurance also plays a crucial role in maintaining customer trust. Consumers expect the products they purchase to be safe, reliable and free from defects. If a product causes harm or damage, the business responsible can suffer significant reputational harm – even if the incident is isolated. Customers may hesitate to buy from a retailer, manufacturer or distributor linked to faulty or hazardous products. Having proper insurance coverage not only helps manage the financial repercussions but also signals a commitment to consumer safety. This proactive approach can preserve and even enhance customer confidence, distinguishing your business from competitors that may not be as prepared.
Defective products have the potential to cause life-altering injuries. Product liability litigation can be lengthy and financially draining, particularly for businesses that are underinsured. Between legal expenses, prolonged litigation and potential verdicts, the financial toll can be immense. If a business lacks adequate insurance coverage, the costs of defending against and settling claims can lead to significant financial hardship – or even insolvency.
It’s also important to recognize that product liability insurance is not a one-size-fits-all solution.
Every business has unique needs, and the level of coverage required depends on factors such as the type of products you sell, the size of your business and the risks associated with your industry. A small business specializing in handmade crafts will have vastly different insurance requirements than a company that manufactures industrial equipment or consumer electronics.
As a business owner, it’s essential to work closely with an insurance provider to assess your potential risks and ensure that your policy offers comprehensive protection tailored to your specific needs. Carefully evaluating your coverage options and consulting with a knowledgeable broker can help you secure the right level of protection for your business.
