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Product Liability Insurance: Can You Not Have It?
Today's economy depends heavily on the enormous range of products that are sold daily to consumers. Indeed, consumer demand for both the necessities and conveniences of life ' everything from lawn mowers and ovens to trampolines and espresso makers ' drives many manufacturers constantly to develop new products to sell. In today's litigious society, however, virtually every product sold represents at least the potential for product liability exposure. Jury awards and settlements frequently make headlines ' everyday household appliances, such as coffee makers, fryers, and blenders, have yielded damage awards or settlements as high as $2.25 million. Injuries from lawn mowers have generated awards or settlements as high as $2.6 million. Even furniture has the potential to yield awards or settlements in excess of a million dollars. Moreover, product liability exposure has ruined certain industries, eg, asbestos, and small companies without adequate insurance protection could face bankruptcy from a single product recall.
Product liability exposure is a fact of life for any entity that is a link in the chain running from the initial manufacture of a product, including manufacturers of component parts, to the end link retailer who sells the product to the ultimate user. Increasingly, jury awards and settlements for product liability claims involving personal injuries and/or property damages have become significant risks that prudent companies must take into account as a cost of doing business. The prudent company will be proactive in taking steps to ensure that it has done all that it can at least to minimize its exposure due to product liability claims. One important component of this business plan is product liability insurance coverage.
It is true that some companies have a greater need for product liability insurance than others. Clearly, the manufacturer of a product is typically readily identified as the first target of a product defect claim. However, far more companies have exposure than one might think at first glance. For example, consider who is implicated in the sale of a children's backyard 'jungle gym' ' the rope manufacturer that sells climbing rope to a wholesaler; the seat manufacturer that sells swing seats to the wholesaler; the wholesaler itself, which uses the climbing rope, the swing seats, and numerous other parts to put together the 'jungle gym' set and then ships it to the retailer; and finally, the retailer, who not only sells the 'jungle gym' but may also in some cases assemble it for the consumer. Each of these participants has a need for some degree of product liability insurance.
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