What Is Product Liability?

Product liability insurance policies protect companies that manufacture, distribute, and sell products from liability claims made because of defects in products that cause damage or personal injury.

The costs of liability lawsuits and court costs can be extremely high. If a legal decision goes against you, you could be liable for the following costs:

• Legal defense
• Litigation or litigation management
• Medical costs
• Surveillance or private investigators
• Hearing representatives
• Fraud investigators

You may be responsible for these costs even if your business is found not guilty of the allegations. Defense costs can add up quickly, and product liability insurance covers costs on your business's behalf.

Who Needs Product Liability?

All businesses that manufacture, distribute, or sell products should have product liability insurance.

Retail stores, online stores, restaurants, designers, and wholesalers are prime examples of businesses that need product liability coverage.

Product liability is just as important for business-to-business companies as business-to-consumer operations.

Coverage Breakdown

Product liability is a type of liability coverage, and it may be available as part of your commercial general liability policy.

Product liability covers the following types of claims:

• Medical costs to treat a customer's injuries
• Legal costs and fees to support your defense
• Judgments and settlement fees levied against your business

The costs of product recalls can significantly impact your bottom line. Some insurance companies also sell product recall insurance to cover costs connected with product recalls.

What Are the Risks of Product Manufacturing and Sales?

How high can product liability lawsuits run? Personal injury awards due to product liability in 2019 averaged over $7 million, and that is a sum most manufacturers would have difficulty paying.

Product liability lawsuits go beyond reimbursing a consumer for a defective product. You could also be sued if one of your products causes an injury or if the injury causes a loss. Third parties may also be allowed to file product liability lawsuits depending on the state law.