What is product liability?
Over thousands of injuries are caused by defective or dangerous products every year in the United States. Product liability laws are the major standards to measure who is responsible for those flawed products. Unlike other types of civil cases, the burden of proof often falls on the manufacturer or distributor to prove their product did not cause the injury or property damage of which it is accused. In fact, many definitions of product liability law require that any products that cannot meet the ordinary expectations of the consumer may be treated as a defective or even dangerous.
In the U.S., product liability laws may differ greatly from state to state. Thus, it’s very difficult for the business owner to navigate all the product liability laws in every jurisdiction. A good risk management expert partnership will help businesses more effectively maintain tolerable risk levels for their business.
What may cause the product liability?
Overall, there are three types of defects that may cause the injuries or property damage from which product liability claims may arise:
1. Design defects: the product contains flaws in the intentional design that may cause injuries and damages to their users. Therefore, the product contains an element of danger from its very creation.
2. Manufacturing defects: After the product has been designed, it must enter the manufacturing stage to be produced. Product manufacturing defects arise from errors in the manufacturing process, primarily from poor quality control or technical skill level during any stage of the manufacturing process, including raw material selection, selection of manufacturing equipment, the manufacturing or machining process, and the final assembly process.
In U.S. the law applies special doctrines to product liability cases to help plaintiffs recover damages even if they cannot prove a manufacturer was negligent.
a. This doctrine of “res ipsa loquitur” means “the thing speaks for itself”, and holds that the defect at issue would not exist unless someone was negligent. If the doctrine is successfully applied, the burden of proof is shifted to the defendant to prove they were not negligent.
b. The second rule that helps plaintiffs in product liability cases is that of strict liability. If strict liability applies, the plaintiff does not need to prove that a manufacturer was negligent, but only that the product was defective. By eliminating the issue of manufacturer fault, the concept of no-fault, or “strict” liability allows plaintiffs to recover damages where they otherwise might not.
3. Marketing defects: it includes inadequate instruction, inaccurate product labels, and inaccurate or absent warning labels.
What serious consequences will result from product liability?
• High defense costs from long litigation periods
• Large payouts for damages
• Damage to company reputation and market share
• Inability to secure additional distributors
Product Liability Insurance
Product liability insurance is designed for all product manufacturers and suppliers. It can protect against claims of injuries or property damage caused by products sold or supplied by different businesses. It helps protect the business by ensuring that if a claim occurs, the business does not bear the responsibility for all the defense costs and settlements.
Why purchase product liability insurance?
1) It is impossible to successfully avoid all liability risks
2) To protect the products’ reputations
3) To protect the export markets with faster response to insurance certificate requirements
4) To maintain stable monetary conditions
5) To meet the need of the countries of import
What can product liability insurance cover?
1) Legal liability incurred because of injury or damage to a third party resulting from the use of the covered product (Ex: medical expenses, reduction in income, bodily injuries, and emotional injuries)
2) Litigation Fees (Ex: Consultation fee, contingency fee, flat fee, statutory fee)
Product liability claims are complicated to navigate. A strong risk-management partner, with product liability expertise, can make it an easier process for the insured.