Product Liability Insurance
Product liability insurance protects companies against lawsuits from product-related injuries or accidents. The types of accidents product liability insurance policies protect against are usually those stemming from the use or handling of products or goods manufactured, sold or distributed by the named insured. Product liability insurance generally covers personal injuries, not property damage. While some general insurance policies cover product liability, the majority do not.
Product liability insurance policies usually limit coverage to occurrences that took place when the policy was in effect. Nevertheless, many product liability accidents do not occur until some time after the product in question was made, sold, or marketed. Thus, a product liability accident involving a product that was made, sold, or marketed when an insurance policy was in effect would not be covered if the accident happened after the policy was no longer in effect.
Cost of Insurance
Because of the potential for large jury verdicts against the manufacturers, distributors and marketers of unsafe products, product liability insurance can be very costly. It is estimated that product liability insurance costs 26 cents for each $100 of retail cost. If a product has the potential to cause bodily harm, the premiums for product liability insurance are even higher. Some small businesses are unable to afford the premiums to insure their products against product liability claims. What’s more, some distributors or sellers of products require the manufacturer to have product liability insurance before they will agree to distribute or sell the product.
Many manufacturers of products that are at a greater-than-normal risk for causing bodily harm are unable to obtain product liability insurance. For example car manufacturers, gun manufacturers and some toy manufacturers do not have product liability insurance protection. This lack of insurance may be because the insurers do not want to take on the risk of insuring a dangerous or potentially dangerous product or because the manufacturers are unable or unwilling to pay the premiums for such coverage. As a result, some manufacturers are forced to self-insure for product liability claims.
The lack of product liability insurance has caused numerous business failures. Businesses who make, distribute or sell products at risk for causing bodily harm can easily be bankrupt if a product they deal in causes multiple bodily injuries. Likewise, a single catastrophic jury verdict against such a business could render it insolvent. Thus, businesses that deal in potentially dangerous products need to carefully consider how to solve the problem of product liability insurance.