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Product Liability Insurance 101

In 2014, General Motors (GM) recalled approximately 30 million vehicles around the globe due to defective ignition switches, which could shut the engine off while in operation and prevent the airbags from inflating. At least 124 people died as a result from this defect, and many more were injured. Eventually, GM pledged to pay at least $1 million in each death claim — for a total of $124 million — as well as significant sums of money for those who had suffered injuries due to the defect.

This highly publicized case illustrates perfectly how vulnerable companies can be to product liability lawsuits — lawsuits that can arise in the event companies can be held liable for their products, causing injury or death to consumers.

For more information from Grand Mutual Insurance about product liability insurance in Los Angeles, reach out to us online or over the phone at 888.732.5994.

Product Liability

According to FindLaw, product liability occurs when a seller or manufacturer is held liable for transferring possession of a defective product to a consumer.

A product can be defective due to:

  • A design defect: A specific aspect of the product’s design that’s fundamentally unsafe.
  • A manufacturing defect: A defect that occurs during the manufacturing or assembly process.
  • A marketing defect: A defect in how the product is marketed, for example due to incorrect or incomplete labeling or insufficient safety warnings.

It’s important to note that any party within a product’s distribution chain can be held liable, including the manufacturer or parts manufacturer, the company that installs or assembles the product, the wholesaler and the retailer.

Product Liability Insurance

The costs of a product liability lawsuit can quickly add up. According to the Insurance Information Institute, in 2015, the average personal injury product liability jury awards amounted to $2,500,000. Of course, you also have to consider legal defense costs on top of that. Clearly, for small- to medium sized businesses, having to pay a product liability claim can be a serious, sometimes insurmountable financial hit.

Fortunately, you can protect yourself from product liability claims by purchasing product liability insurance in Los Angeles. Here are a few points to keep in mind:

  • Your coverage only goes into effect once you have transferred possession of a product to a consumer.
  • You must keep product liability insurance for as long as a product could reasonably be used — even if you’re no longer manufacturing it.
  • Your coverage limits and premiums are based on the product itself, your role in the distribution chain and how many products are sold.
  • Product liability insurance does not cover product recalls.
  • As IA Magazine advises, you may not need additional professional liability coverage, since the design, manufacture and assembly of the product are covered under your product liability insurance.

Product Liability Insurance in Los Angeles

Purchasing product liability insurance is essential if you design, produce, assemble or sell products for the general market. To learn more about how product liability insurance can help protect your business, call 888.732.5994 or email Sharon Ezra at Sharon@grandmutual.com