Product Liability Insurance Coverage -- You May Need it to Protect Assets
Product liability insurance needs to be investigated by you if you handle any of products in your business along the distribution chain. While many small businesses understand the need for general liability insurance, there is a lack of understanding about who needs product liability coverage.
Here’s a quick example. We attended a seminar at which a Florida product liability lawyer (it could have been a Virginia product liability lawyer, an Alabama product liability lawyer, an Atlanta product liability lawyer or a lawyer from anywhere else in the U.S.) spoke to a group of small business owners about their potential exposure to product liability lawsuits and product liability cases and the need for insurance to protect the business.
To drive home the point on exposure, he discussed a case in which he had been involved regarding a person who decided to strip off old paint that was on lawn furniture. This individual took the lawn furniture into the basement, filled a gallon-sized gasoline can with gas at the local gas station, took the flammable material into the basement and began to scrub off the old paint using the gasoline and a wire brush. Soon, gas fumes began to spread around the basement. Before long, the food freezer in the basement, which had not been running, click on. Anytime an electric motor clicks on, there is a momentary spark. In this instance, the spark ignited the gasoline, which blew up the basement causing a horrendous fire and injuries to the person.
The person who had brought the gas into the basement survived the explosion with burns over 95% of their body. Was the person stupid and unthinking? Yes. But that did not prevent a lawsuit and in that lawsuit the gasoline supplier, the gas station, the gas can manufacturer and the refrigerator manufacturer were named and had to defend themselves.
Do You Handle Products on the Distribution Chain?
Typically, anyone involved in distributing a product can be held liable, although you need to check with your attorney and insurance agent about your particular situation. These lawsuits result from someone incurring bodily injury, property damage or some other loss that is connected to the product. The Consumer Products Safety Commission (CPSC), which has jurisdiction in these matters, is constantly recalling products of various types. This usually happens after consumers complain about the products. Frequent recalls have involved baby cribs, baby car seats and many other products.
There is also great flexibility in who can bring the lawsuit. It is not just the person who bought the product. It can be someone injured by the product.
Err on the side of caution when it comes to product liability insurance. Ask a lot of questions of your insurance broker and make sure you understand why you do or do not need product liability insurance.
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