Product Liability Insurance: Ensuring Protection

Articles — 17 April 2011

Product liability insurance is one way of manufacturers and sellers use to protect their financial assets against the damages caused by their products. By protecting financial assets, it means that manufacturers and sellers need not shell out their hard earned cash in case there is a lawsuit directed to their distributor or merchant that sold their product. It would be the insurance who would be tasked to handle settlement or litigation saving the company from incurring heavy financial losses. Product liability insurance is of prime necessity for just about any type of business that is involved in manufacturing.

Manufacturing companies, distribution outlets and sellers obtain product liability insurance because of the three things that cause lawsuits.

Consumers would claim that there are flaws during production or while the product are being manufactured. During the production process there is already a defect. An example of defective ingredients or components being added is when lead paint is used to paint dolls, and melamine or milk.

Product liability insurance also protects the business against lawsuits due to defects in design. Due to the design of certain products, it causes injury or accidents, hence it is deemed unsafe. An example of which is the total recall of Toyota Priuses and other models when they found out that there is a problem with the brakes causing accidents because the cars failed to stop.

Defective instructions or labels can also be a cause for lawsuits. When an item is not labeled properly or the warnings are not sufficient, then a lawsuit may happen. A constant example of defective warning labels is the one used before on cigarettes. There were no warning signs regarding smoking being hazardous to one’s health or nicotine is addictive, that is why there are major lawsuits against tobacco firms.

Any contingencies may arise and it is important that one should be prepared to meet it head on, and by being prepared, it means acquiring a product liability insurance.