In 2014, Richard Kirk ate part of a marijuana edible, began behaving erratically, and shot and killed his wife. The candy, which was the size of a Tootsie Roll, contained 10 servings of THC around 10 mg each. Kirk was charged with first-degree murder.
Two years later, his children’s guardians filed a lawsuit against the manufacturer of the edible, Nutritional Elements, claiming that the packaging did not include proper warnings about the potency of the small candy or the known side effects of THC.
Product liability insurance coverage protects your business if a product you manufacture or distribute causes bodily injury or property damage. Who needs a product liability policy and what does it cover?
In this guide, we’ll explore:
- What is product liability insurance?
- What does product liability cover?
- Who needs product liability insurance?#whoneedproductinsurance
- How much does product liability insurance cost?
- How quality control programs impact your product liability insurance
- How to get product liability coverage
- The product liability claim process: What to expect
- Get the product liability coverage you need from a partner you trust
What is product liability insurance?
Product liability insurance provides financial protection for your business if someone claims that a product you manufactured, distributed, or sold caused injury or damage.
What does product liability insurance cover?
Product liability covers financial losses, including medical expenses, legal costs, and other costs associated with defending a lawsuit. It can also cover the cost of compensating injured parties for damages.
What is not covered by product liability?
There are a few things typically excluded from a product liability policy, including:
- Intentional acts or criminal behavior
- Damages arising from unintended use of the product
- Professional services like consulting
- Product recalls – these costs are covered by product recall insurance
- Pollution and environmental damage
- Employee injuries covered by workers’ comp
What is and isn’t covered can vary, so it’s important to be familiar with your specific policy details. At POWERS, we go through a thorough assessment with all clients to ensure the policies they buy fit the risk they face.
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Product liability insurance vs. personal injury insurance
Product liability insurance covers claims related to injury or damage caused by your product. Personal injury insurance, on the other hand, covers claims related to injury caused by your operations, employees, or products.
Product liability insurance vs. errors and omissions insurance
Product liability covers injury or damage caused by your physical product, while errors and omissions insurance covers damage caused by negligence or errors in services you provide.
Who needs product liability insurance?
Any business that manufactures, distributes, or sells products should consider purchasing product liability insurance. This can include a wide range of businesses anywhere in the supply chain, from manufacturers of industrial equipment to retailers selling consumer goods.
Product liability for contractors
Product liability insurance is particularly useful for contractors. Construction projects involve multiple parties contracted to work together, and any of the parties could be held liable for damages caused by a defective product.
For example, if an HVAC contractor installs a faulty piece of equipment, who is the target of a product liability lawsuit? The contractor? The retailer who sold it to the contractor? The product manufacturer who distributed it to the retailer? It depends on the circumstances, but often any of these parties could be at risk.
A product liability insurance policy can give you peace of mind in these situations.
How much does product liability insurance cost?
The cost of product liability insurance varies depending on a number of factors, including:
- Size and nature of business
- Types of products being sold
- Policy limits and deductibles
- Claims history
- Risk management practices
Because insurance rates can vary, it’s important to work with a risk manager to find the best solution. Businesses with complex risk profiles will find the most value from partnering with an independent insurance agent that will help them proactively manage risk for long-term success.
How quality control programs impact your product liability insurance
A strong quality control program can help you identify and correct product defects before they reach the market. By setting clear quality standards, conducting thorough product inspections, and maintaining proper labeling protocols, you can prevent product liability claims and reduce your product liability premiums over time.
How to get product liability coverage
An experienced agent should recommend insurance policies for you based on your business’s unique exposures and risk profile. If your agent hasn’t recommended product liability but you think it could be a good fit, ask about it.
Your agent will find the best options based on your risk assessment and present them to you. At POWERS, we cover the following questions when presenting clients with coverage options:
- Does the pricing match the client’s expectations?
- Does the policy have the appropriate limits, deductibles, and coverage enhancement endorsements?
- What are the carrier’s financial stability, reputation, and claims process like?
- What added value can the carrier offer the client – e.g. legal resources, risk management support, and product recall assistance?
At POWERS, we work with some of the best business insurance carriers in the U.S. There’s no need to spend hours researching providers – we’ll make recommendations tailored to your business.
The product liability claim process: What to expect
If you need to file a product liability claim, don’t panic. Thousands of claims are filed every day.
The claim process is different for every carrier and agency, so we recommend learning your insurance agent’s process before you need to file a claim. That way, you’re prepared when the time comes.
Here’s the claim process for POWERS clients:
- Contact your POWERS account manager or claims handler before you call the insurance carrier.
- A POWERS expert will provide a claim consultation to help you evaluate the severity of the claim, your deductible level, contractor referrals, and what to expect going forward.
- With your approval, your account manager will submit the claim to the carrier on your behalf. In some cases, you might choose not to file a claim.
- We’ll pass along your claim number and your adjuster’s contact info.
- You’ll work directly with your adjuster to provide relevant evidence, like product samples, photos, and quality control records.
- If your claim is covered, the carrier will offer a settlement amount to the claimant or provide a defense if a lawsuit is filed against you.
- The claim will be resolved through a settlement agreement or a court decision.
During this process, your POWERS claims consultant will be with you every step of the way.
Get the product liability coverage you need from a partner you trust
Many businesses can benefit from product liability, but how can you make sure you get the right coverage and the most value from your policy? Who will guide you through the claims process when an incident happens?
Any agent can write you a policy. But you don’t need any agent – you need a business partner with proven risk control expertise.
At POWERS, we spent more than 30 years developing what we call “the POWERS Process.” We use this five-step framework to get a deep understanding of your business and make recommendations that not only give you the right insurance coverage but also help you make smart decisions to grow your business.
We know from decades of experience that a one-size-fits-all approach to risk management simply doesn’t work. We’ll take you through a series of discussion points to drill down and uncover exposures you’ve never considered. Then, we’ll build a plan to safeguard your business and look toward the future.
|Insurance as a stand-alone product
|Insurance integrated into your customized risk management plan
|Multiple, run-of-the-mill applications to assess your risk
|Customized, proprietary assessment for a deep understanding of your risk
|Focused on up-front cost savings
|Focused on long-term cost control
|Salespeople who write your policy and ghost you until renewal
|Partners who help you make smart, growth-focused business decisions
|Say they care about your business’s success
|Show you we care by setting your risk management plan in motion