The volume of product liability cases continues its upward trend in federal courts with pharmaceutical and medical devices listed as the most common products involved in lawsuits followed by vehicles. Unfortunately, product litigation is time-consuming and costs a lot of money. In some cases, a lawsuit can ruin an entire enterprise. If your business has not made provisions for a product liability coverage, it is time to seriously consider protecting your company from litigations that could damage your enterprise and its reputation permanently.
Types of Businesses That May Require Protection
If your company manufactures, creates, distributes, and sells products, you are legally liable for any defect that results to harm or injury due to their use or consumption. For example, 22 victim plaintiffs took legal action against Johnson & Johnson (J&J) for its defective talcum powder alleging that women’s ovarian cancer was due to asbestos exposure in J&J baby powder. Each victim was awarded $25 million which is a huge sum. Thus, a product liability insurance will offer the protection from costs should your goods allegedly malfunction or do not work properly.
In addition, the insurance will cover compensatory and medical costs that you might have to pay to claimants if it is proven that you are at fault, or your products caused the injury. Hence, the insurance will cover design, manufacturing, and marketing defects. Furthermore, you will need to hire lawyers to defend your case in court. Attorneys will scrutinize the product liability law to see if plaintiffs have a valid case. Other costs associated with the case will also be covered by the insurance. You may even keep a lawyer on retainer to provide legal advice on your rights as a business manufacturer, distributor, or seller.
How Much Insurance Will You Require?
The more products you make or sell, the higher your risk is for a product liability lawsuit. Hence, you will need a larger amount of product liability insurance. Note that the coverage limit will depend on the industry, location, claims history, and annual earnings. To illustrate, if your products are hazardous in nature such as flammable liquids, corrosives, and gases, it is recommended to purchase higher coverage limits. Moreover, if goods are sold in a highly litigious territory, you should also consider buying a bigger insurance.
According to AdvisorSmith, the average cost of a product liability insurance for small businesses is $1,192. However, the amount of premiums that you will pay will vary depending on the industry you’re in. The product type will affect your insurance cost as well because the risks that a good will cause injuries or damage to property differ. To illustrate, a company that sells stationery will have lower premiums while higher-risk products such as electronics or cleaning materials will cost more to insure.
Product liability litigations can cost a lot of money for any type of business. To protect your interests, consider an adequate product liability insurance that will help pay for claims and shield your business from bankruptcy.