Product Liability Insurance – What Does It Cover?

Product liability insurance is for companies that make or sell items to people, which comes with risks such as lawsuits for product defects and copyright issues.

Key Takeaways

  • Product liability insurance protects businesses from financial losses due to defective products causing bodily injury or property damage.
  • It covers legal fees, medical costs, compensatory damages, and business losses related to product defect coverage claims.
  • Businesses can be held liable under strict liability laws, even if there was no negligence on their part.
  • Proper coverage helps mitigate risks associated with negligence claims, risk management, product recall insurance, and errors and omissions insurance.
  • Manufacturers, suppliers, retailers, distributors, and importers all need adequate product liability insurance.

Product liability insurance is key for companies today. It shields them from huge financial hits due to product defect coverage claims. Even if a product was misused, this insurance can still help cover costs like legal fees and medical bills.

This kind of protection is essential for any business that sells goods. It ensures they won’t face bankruptcy from the costs of lawsuits or recalling faulty items.

Understanding Product Liability Insurance

Product liability insurance plays a big part in protecting businesses. It does this by covering the legal costs from bodily injury or property damage caused by their products. It goes past regular general liability policies, offering indemnity protection designed for the manufacturing and distributing sector.

Definition and Purpose

Unlike warranties, this insurance shields companies from legal troubles due to their products. Its main goal is to provide indemnity protection for claims that arise off their premises. It helps companies deal with damages that their products might cause.

Coverage for Bodily Injury and Property Damage

This insurance looks after costs from bodily injury or property damage. It handles legal costs, medical bills, and other expenses tied to product injuries. This keeps businesses from major financial hits due to accidents.

Legal Liability Protection

Having this insurance means your insurer will help defend your company in court. This representation is crucial, as legal bills without it could be very high. It ensures a company can follow consumer safety regulations without as much worry.

Who Needs Product Liability Insurance?

For business owners, safeguarding against product liability exposure is vital. This includes those involved in making, selling, or importing items. Appropriate coverage protects against negligence claims from faulty or unsafe products.

Manufacturers and Producers

Companies making and launching products must have solid product liability insurance. They face risks as a product fault may cause harm, damages, and legal actions.

Distributors, Wholesalers, and Importers

Not just makers, but sellers and importers should be wary of product liability exposure. Distributing or importing products without performing safety checks leaves them open to negligence claims. Even if not the maker, they could be sued over the harm products cause.

The more products sold, the more involved parties, the higher the need for good insurance. This shields a business from huge financial hits in our lawsuit-heavy world.

Business Type Product Liability Risk Coverage Needs
Manufacturers High Comprehensive coverage for all stages of production
Distributors Moderate Coverage for handling and selling products
Importers Moderate to High Extensive coverage for imported products

Product Liability Claims

Product liability claims pose many challenges for manufacturers and businesses. These claims come in three key types: design defects, manufacturing defects, and not warning consumers about risks.

Design Defects

Design defects are problems that come from the product’s original design. They can make a product dangerous to use as intended. Manufacturers can be found strictly liable for these flaws, even if they tried their best in designing the product.

Manufacturing Defects

On the flip side, manufacturing defects happen during the making of the product. They occur when the product is not made exactly as it was supposed to be. For example, a toy with parts missing or a cake mix contaminated would be considered defective.

Failure to Warn

Failure to warn claims occur when companies don’t provide enough information on product safety. Companies must tell customers about any risks or dangers the product might have. If they don’t, they can face claims of wrongfully causing harm due to a lack of warnings.


What is product liability insurance?

Product liability insurance helps makers and sellers. It covers them against claims due to harmful products. It safeguards businesses when their product harms a person or their property, even if wrongly used.

What does product liability insurance cover?

This insurance helps with legal fees, medical costs, compensatory damages,and lost business due to harm caused by your product. It ensures you’re financially protected if someone gets hurt by a product you made or sold.

Who needs product liability insurance?

Companies selling products need this insurance. This includes manufacturers, producers, and sellers. They can be legally responsible if their product causes harm.

What are the common types of product liability claims?

Product claims often involve design defects, manufacturing flaws, or missing warnings. This means products could be harmful from start (design) to finish (manufacturing errors) or not warning about risks.

What are some common insurance coverage defenses in product liability cases?

In insurance, some common defenses are:the own-product exclusion, the sistership exclusion, and the loss of use exclusion. They limit coverage for certain situations. For example, coverage might be cut if a product isn’t used as expected.

Source Links

nationwide insurance, allstate, travelers insurance, liberty mutual insurance, safeco, the hartford, attune, chubb, amtrust, employers
  • Nationwide
  • Allstate
  • Employers
  • The Hartford
  • Travelers
  • Liberty Mutual Insurance
  • Chubb
  • Safeco Insurance
  • Berkshire Hathaway Guard
  • Am Trust
  • Attune
  • and many more..

*Disclaimer: Information on this website is general insurance advice. Please speak with a local insurance professional as they are able to analyze the nuances of your specific business. This is an important step to ensure you don’t have any unknown gaps in your coverage.

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