A Manufacturer’s Guide to Proper Product Liability Coverage

Product liability coverage provides financial protection for manufacturers in the event the product your company produces causes injury or damage to third parties. This type of coverage is tailored to the specific risks your company may be exposed to. Products can harm consumers in the way they are manufactured, designed, marketed or even misused. It is important to note that manufacturers can still be held responsible even if consumers use your product incorrectly.

There are a few scenarios where your manufacturing company could be held responsible for damages from the use of your product:

1. Product design, manufacturing, assembly and packaging – For all of these instances your company could be held liable and need to defend itself.

2. Directions, warnings and flawed marketing – If instructions for and warning signs on your product lead to misuse, then your company is responsible for these damages. It is critical to have the correct wording around the use of your product.

3. Partner, investor and affiliate relations – Other companies that you do business with could require that you have product liability insurance.

Even if product liability is covered under a general liability policy, it does not mean the scope of the coverage isn’t limited or that certain products are excluded by endorsements that are found later in the policy. Therefore, manufacturers must ensure they have enough product liability coverage for all products and there are no limitations. The amount of coverage to buy depends on the type of product, the volume of sales and any other companies or suppliers that are involved in the production process. The more products your company is producing, the more likely one of these products has a defect and the more critical it is that your manufactured goods are covered under product liability.

Another critical aspect to consider is if your company has international exposure. If the answer is yes, then your manufacturing company should consider obtaining international coverage for your products and completed operations policy.

Product liability is critical for manufacturers, and ensuring you have adequate coverage for all of the “what ifs” that may happen can be a complex undertaking. Working with a trusted RCM&D expert can help you ensure you are prepared for even the most unexpected scenarios.