The risk of product liability hangs heavy over any company that manufactures goods. When a previously unknown defect or other issue causes injury or illness, many people may be affected. This can lead to an expensive class-action lawsuit, with all the associated legal costs, as well as considerable reputational damage. To avoid disaster, companies must know how to manage these risks. 

Examples of Product Liability

Product liability lawsuits sometimes stem from defects in manufacturing. Others allege a failure to warn consumers about the potential risks. Below are two hypothetical examples:

• A space heater overheats, melts and combusts, starting a house fire. The manufacturer is sued for a defect in manufacturing.
• A coffee pot causes severe burns to consumers. The manufacturer is sued for failing to warn consumers of the risk of high temperatures.

Managing Product Liability Risk

Any company involved in the manufacturing of consumer products must take steps to manage the risk of product liability. While the protocol will be different for each manufacturer, the following best practices serve as the foundation for most risk management programs:

1. Prioritize safety. Safety must be a top priority at every step, from design to distribution. Take steps to avoid contamination, defects and other potential dangers. Also ensure that suppliers are adhering to strict safety standards and have clear agreements regarding safety practices in place.
2. Provide clear warnings. A product that is perfectly safe when used as intended may become hazardous when used in other ways. Provide clear warnings about any possible dangers.
3. Monitor complaints. Regardless of how they are received, complaints should be recorded and analyzed for possible patterns that could indicate a more widespread problem.
4. React swiftly and thoroughly. If a possible problem is identified, the company must take swift action to prevent a bad situation from getting worse. Doing anything else may result in claims of an attempted coverup.

How Can Product Liability Insurance Help?

If a product liability lawsuit is filed, a company can face significant costs related to defense. Settlements and awards can be very expensive.  Even if a lawsuit is not successful, the legal costs can be substantial.

Product liability insurance, which is a separate policy, provides important protection against this risk. If a lawsuit is filed, product liability insurance will cover the defense costs along with settlements or awards up to the limits of the policy. Coverage can also be obtained to cover the costs associated with recalls.

Wilson, Washburn & Forster is a boutique independent insurance agency that has been in business since 1961.  We provide specialized insurance services for manufacturers and can help you protect your company against product liability exposures. You will find that our experience, claims handling, service, and community commitment is unrivaled.

Contact us today for a complimentary analysis of your current insurance program by an insurance specialist in this field at 786-454-8384.