Product Liability Explained
By: Mary Thompson, Capstone Brokerage President, December 22, 2015
When it comes to product liability, as discussed last month, there are a number of parties that can be involved in the event of a claim. Product Liability claims arise when a product sold to a consumer causes injury and is considered defective or unreasonably dangerous. The very basic understanding of product liability rests in definition and the law.
Product liability refers to all parties along the chain of manufacture who are held liable for placing a defective product into the hands of a consumer. The responsibility of a product that causes injury can lie with any and all parties involved in the distribution line of the product.
Product Liability Law is determined at a state level and varies widely from state to state. In the US there are laws to protect consumers based on negligence, strict liability, breach of warranty and consumer protection.
3 most common Product Liability Claims
1. Manufacturing or Production Flaws:
This type of product liability claim is based on the production process. Manufacturing or production claims take place when, at some point in the production process an unreasonably safe defect is found in the product. For instance, many claims on the news about children’s toys in the recent years have found that some toys imported from China have contained dangerous chemicals that can harm children, specifically lead often used in the paint.
2. Design Defect:
Design Defect Product Liability claims are made against a product when the design of the product is considered inherently unsafe. There are two basic types of design defect; defectively manufactured and Defective Design.
A defectively manufactured product liability claim happens when the injury-causing product was defectively manufactured. It is flawed do to an error in the manufacturing process. This can happen when the factory where it is fabricated makes an error. An easy example would be children’s medication pulled from the shelf a few years ago containing a poisonous substance.
Defective design product liability claims arises when a products design is considered or deemed dangerous. These types of claims do not arise from error in the manufacturing process or by consumer use but rater from a claim that the entire line of products is dangerous. A great example is the design defects in the news about certain car models having issues or being recalled. Often a vehicle recall stems from a defect product liability claim.
3. Failure to Provide Adequate Warning or Instructions
This type of product liability claim involves inadequate instruction for product use as well as improper warnings. Both are equally dangerous for the consumer and the manufacturer.
Inadequate instruction can cause a product liability claim. When you are building something, have you ever wondered why the instructions are so thorough? For example, a bookshelf will have instructions on home assembly as well as how to secure to a wall to prevent from injury. If the instructions are not clear and an injury occurs , a product liability claim can arise.
Failure-to-Warn is also the responsibility of the manufacture. Manufactures must provide warnings for all products . In other words, any danger from use must be explained. For a simple example, those really long commercials for prescription medication warnings have a purpose as well as the inserts that come with both over the counter and prescription medications. All dangerous side effects as well as other possible drug interactions should be listed on all medications.
The Cost of Product Liability Protection
Product Liability insurance will cover bodily injury and property damage. It includes coverage for damages, legal defense, and settlement charges. The cost is based on the product itself, the volume of sales and where a business fits into the chain of manufacturing. Product Liability coverage is often also based on a percentage of the retail cost. For example on average it is 28 cents per each $100 or retail cost. The lower the risk of the product, the lower the cost to insure against product liability.
Product liability will protect any business or individual that manufactures his/her own product. It is important if a business is involved in any part of a product production that they obtain coverage for that product. For more information, speak to your insurance broker so they can help guide you to proper coverage.
