Understanding Product Liability Insurance with an Example
In the present era of heightened legal action, businesses must take every possible measure to protect themselves. There are numerous ways in which a product can go wrong and potentially subject a company to litigation.
A faulty product has the potential to harm someone or damage their property. Despite a manufacturer’s best efforts to take precautions, mistakes can still happen, resulting in harm. The individual who is injured may take legal action against the manufacturer or distributor, resulting in significant legal fees and compensation costs for the manufacturer or seller.
Therefore, it is wise for businesses to safeguard themselves against the threat of lawsuits resulting from defective products by obtaining a Product Liability Insurance Policy.
Product Liability Insurance meaning with an example
If you obtain a Product Liability Insurance Policy, your business will be shielded from assertions of harm to a person’s body or property as a result of using your company’s defective products. This insurance policy will cover the expenses of defending against legal claims and the compensation awarded by the courts.
You can acquire Product Liability Insurance as part of a comprehensive cover for PUBLIC AND PRODUCTS LIABILITY.
Product Liability Claims can typically be categorized into three types: Manufacturing Defect, Design Defect, and Marketing Defect.
Manufacturing defects– These flaws arise when manufacturers deviate from the intended design of a product. This can involve the use of incorrect components, errors in assembly, or the introduction of harmful substances that cause contamination.
Design defects– If a product has design defects, it can pose a danger to consumers even when they are using it correctly. To seek compensation for injuries sustained from such a product, the affected person may identify the defect, demonstrate how it led to harm, and prove that they were following the product’s instructions.
Marketing defects– Marketing defects in products occur when there are inadequate instructions or warnings or when labels are incorrect, leading to harm. To establish a marketing flaw in a court of law, the injured party may pinpoint the misleading information and demonstrate how it resulted in damages.
An example of product liability insurance
In the present worldwide supply chain, many manufacturers import product parts from different countries. Related to this, a washing machine manufacturing company bought hoses from an external supplier. But, the hoses were not as per the required specifications. As a result, hoses malfunctioned causing injuries to some individuals and water damage to the property. With the help of the product liability insurance policy, the manufacturer was able to cover the cost of the consumer’s injury and damage to the property.
This is a case of manufacturing defects as the washing machine includes a faulty part.
Should your company apply for a product liability insurance policy?
Every company that is part of the manufacturing and distribution process for a product should possess this form of insurance. So, get in touch with New Age Insurance Brokers, so we can help you design the right cover for your products.