Understanding a product liability insurance policy is critical for manufacturers, because there are several ways in which you can be liable for damages when the public uses your goods. This kind of coverage specifically protects your company against claims arising from:
1. Defective Design
If your business conceives your products, it’s important to carry coverage for losses that may be caused by design defects. Testing methods and best practices often reduce or eliminate this issue, but insurance ensures total protection. A notable example of this was the massive recall on Ford Pintos in the 1970’s due to safety issues with their fuel tanks.
2. Flawed Manufacturing
A product liability insurance policy also covers this issue, which generally results from using poor quality materials or careless assembly. While these cases also investigate how the product was being used, manufacturers may still bear responsibility, regardless of findings.
3. Lack of Sufficient Labels, Warnings, or Instructions
A marketing defect relates to the manufacturer’s or seller’s responsibility to notify consumers about safe use. “Failure to warn” claims, such as the “McDonald’s coffee case,” often result when a proven item still poses some potential danger. Your product liability insurance policy can safeguard your business in such claims.
There is always some inherent risk in the manufacturing business. Proper liability insurance coverage protects your company and ensures that your risks are minimal and manageable.