What Does Product Liability Insurance Cover?
Product liability refers to a legal principle that provides that manufacturers are responsible for the safety and quality of the products they produce. Consequently, when a product is defective or otherwise harmful, the manufacturer is liable to compensate those who were harmed. The legal doctrine also provides that products are not manufactured “fit and proper” if they are defective and unreasonably dangerous. So what does product liability insurance cover? We find out below!
If you would like to read more information or learn more about the pricing of business insurance, you can do so here.
What Does Product Liability Insurance Cover?
Product Liability Insurance covers a company’s legal responsibilities related to its products. It may also cover an organization’s physical assets and liabilities related to the design or manufacture of these products. The overall purpose behind this type of insurance is to protect companies from financial losses that may arise from external claims against their products. This includes lawsuits and bodily harm caused by faulty products or otherwise unavoidable accidents that result in injury or property damage.
This type of insurance protects defendants in lawsuits filed by people who were hurt due to product defects or manufactured products. It also covers problems caused by manufacturing, design or sales practices and operations. The insurance protects a company from being held liable for injuries resulting from its product misuse or maintenance.
What Happens To Defective Products?
For a plaintiff to be compensated by an insurance company, there must be evidence that the product was of low quality. The plaintiff must show that the severity of the injury was due to the defect in the product and that it was not caused by improper use or abuse. For example, a poorly manufactured deck may have a piece of wood that is splintering – a condition that can cause injury if it is touched or stepped on.
Another aspect to consider is whether the evidence suggests any kind of negligence in connection with the design or manufacture of the defective product. If so, the insurer will be more inclined to deny coverage based on negligence.
Product Liability Insurance provides enormous financial protection for defendants involved in product liability lawsuits.
The types of products covered by product liability insurance include:
- Vehicles and equipment, such as automobiles, trucks, tractors and farm equipment
- Computers, mobile phones and other electronics
- Medical devices and pharmaceuticals
- Industrial and home equipment such as furnaces, air conditioners and dishwashers
- Construction equipment and materials
- Airlines and aircraft parts
- Vendor products (goods sold to the company by manufacturer)
- Consumer products including food, personal care products, toys and nutritional supplements
For example, suppose a product injures a consumer with an unanticipated defect. In that case, the insurance will cover the company’s expenses incurred as a result of litigation or settlement with the injured party. It may also cover expenses associated with recalls, product damage and defects caused by certain materials or events.
Some basic coverage in product liability policies includes:
- Products-completed operations: Products liability coverage protects companies from claims that arise from injuries sustained on their premises.
- Products-in transit: This coverage protects damage to products being shipped between two locations. It also protects against the theft of products during transportation.
- Products-installation: This insurance covers bodily injury claims sustained by people while installing equipment. The policy may also cover third party liability claims that arise from installing a product.
- Products-completed operations: This coverage protects bodily injury claims or property damage that occur on company property after the installation of a product is complete. It also protects against the theft of products on company property.
- Contractual liability: Contractual liability covers companies against lawsuits from contractors injured while working on a project for your company.
- Workers’ compensation: Workers’ compensation covers employees who sustain injuries at work. It provides compensation for the costs incurred by their injuries.
Losses covered by product liability insurance include:
- The cost of defending against lawsuits.
- Loss of profits.
- Bodily injury.
- Property damage and financial responsibility bonds.
What Does Product Liability Insurance Cover? To Conclude
Product liability insurance is specifically designed to protect companies from claims that arise from products that do not meet safety standards or other regulations or are known to be harmful to people or the environment. The policy covers claims that relate to design defects, manufacturing defects and failure to warn consumers regarding risks associated with a product. It also covers medical expenses such as rehabilitation and surgery expenses. It may also cover awards of punitive damages if they are assessed against an organization due to a lawsuit relating to its products.
Find out more about the importance of insurance here.
Other useful links about Business Insurance:
Project Manager Insurance
Property Manager Insurance
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