Site icon AdvisorSmith

How to Reduce Your Product Liability Risk

How to Reduce Your Product Liability Risk

Get a quote on Product Liability Insurance

If a customer sues your business for bodily injury or property damage caused by a product you manufactured or sold, the resulting legal fees and settlements can be financially devastating. Small businesses are particularly at risk because of the high costs to defend product liability claims and product recalls. Additionally, these claims may result in the loss of trust from the general public and potentially create a bad reputation. Your business should take every preventive measure available to reduce product liability risk.

What are common product liability risks?

Any business that designs, manufactures, sells, or even markets products are at risk of being held liable for third-party bodily injuries or damages. There are many ways your products can put your business at risk. Most notably, product liability can be divided into the following categories: 

Design Defects

The design of your product may be the very reason your business is at risk. Claims of design defects argue that your product is dangerous to use or consume because of flaws within your design itself. As such, these flaws consistently exist with all of your products. 

Example: 

Production or Manufacturing Flaws

There are many ways to try and mitigate errors in the production and manufacturing phase of a product, but when an error does occur, your business may be held liable if the error causes injury or damage to a customer. Unlike design defects, these flaws are unintentional and not part of the original design. 

Example:

Marketing Defects

Customers expect their products to come with adequate instructions and any necessary safety warnings. However, if these elements are not sufficiently included, your business may be sued for the oversight. 

Example:

Strict Liability

Finally, it is important to note that your business is at risk for liability claims even if there was no negligence on your part. A product may simply malfunction and you may be held liable. Under strict liability, a customer may hold your business liable if they can prove that a defect in your product was dangerous and caused injury when it was used as intended. 

How can you reduce your product liability risk? 

There are a number of steps you can take to reduce accidents and improve management systems during the various stages of product development. To help prevent potential product liability claims, consider the following suggestions: 

Research and Design

It is essential to eliminate as many potential hazards during this early stage of product development. The following are some ways to reduce your product liability risk. 

Manufacturing

Although many risks should be eliminated during the design phase, errors that occur during the manufacturing phase of a product pose huge liability risks. 

Sales and Marketing

Businesses that sell and market products may also be held liable for defective products even if they did not manufacture the product. 

Post-Sales

Although the product is out of your hands, there are still some ways you can reduce your liability risks during this stage. 

Product Insurance

To give your business additional protection against product claims, it may be wise to consider securing product insurance. Product insurance comes in many forms, but the primary goal is to provide financial coverage for the legal costs of defending claims of bodily injury, property damage, or financial losses caused by your products.

Product insurance can be obtained through:

Below we’ve highlighted a few of our trusted partners who offer product coverage in various forms:

InsurerProduct LiabilityGeneral LiabilityBusiness Owner's Policy
CoverageSmith??????
CoverWallet??????

Final Word

Product liability insurance is effective and important for all businesses who sell goods and products, but there are many steps your business can take to mitigate the risk of liability claims. While it is impossible to foresee product failure, your business can protect itself by taking every step possible to ensure the production of safe products and prepare your business in the event of a liability claim.

Exit mobile version