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How Product Liability Insurance Offers Essential Business Protection in CNY

March 27th, 2024 | 3 min read

By Daniel J. Middleton

CNY blender company protected by product liability insurance copy

Building your business in Central New York is an achievement, but it comes with a responsibility: ensuring the safety of the products you sell.

At Horan, we understand the potential anxieties around product liability, especially for businesses like yours. We’ve helped many Central New York entrepreneurs obtain the right coverage to secure their products-based operations.

This article dives into the complexities of product liability, the challenges faced by different industries, and the crucial steps you can take to navigate this landscape with confidence. 

Whether you're a seasoned entrepreneur or just starting out, this article equips you with the knowledge and resources you need to navigate the world of product liability and ensure your business thrives.

Understanding Product Liability Insurance

When you’re running a business, you’re responsible for the products you sell. That’s where product liability insurance comes into play. It’s a segment of general liability insurance that specifically covers your products and completed operations. While many focus on the latter, it’s crucial to understand both aspects.

Imagine you own a Pulaski company that manufactures kitchen blenders. You’ve designed a new model that’s sleek, powerful, and comes with an innovative feature—a detachable blade for easy cleaning. You’re confident it’ll be a hit in the market.

But mere weeks after release, a customer reports that while she was making a smoothie, the blade detached unexpectedly, causing injury. This incident is a classic case of product liability

Despite the innovative design, if the product poses a risk to consumers due to a design flaw or malfunction, you’re responsible.

Product liability isn’t just about immediate cause and effect. It’s about foreseeing potential risks and ensuring your product design considers safety as paramount. It’s also about how you communicate those risks and instructions to your consumers.

The Challenges of Product Liability for Distributors

Product liability insurance, protecting your Central New York businessAs a distributor, you’re the bridge between manufacturers and consumers. You don’t make the products, but you do sell them. This means you inherit the liability from the original manufacturer. 

If you’re distributing parts for heavy machinery, like safety components designed to shut off the machine to prevent injury, you’re relying on those parts to function flawlessly.

When these parts come from abroad—let’s say Italy—you’re dealing with products manufactured under different regulations, outside of U.S. jurisdiction. This raises concerns for insurance carriers. They’re hesitant to cover products made offshore because they can’t verify the safety standards or manufacturing processes.

Insurance carriers often exclude or deny coverage for products and completed operations tied to these international goods. It doesn’t matter if they’re from Mexico, China, or Italy. The risk is deemed too high, leaving you, the distributor, in a vulnerable position should a product fail and cause harm.

High-Risk Industries and Insurance Hurdles

Product liability insurance isn’t just a safety net. It’s a fundamental aspect of responsible business operations. It’s there to protect both the business and the consumer when a product causes harm. This coverage becomes crucial for businesses that produce items with inherent risks, such as toys and clothing.

Toys and clothing manufacturers often face significant challenges in securing product liability insurance. The risks are tangible: 

  1. a child could choke on a small part of a toy, or 
  2. a consumer could suffer an allergic reaction to a clothing dye. 

These scenarios can lead to substantial harm, making insurers cautious.

The beauty industry also grapples with these issues. Makeup manufacturers must consider the potential for skin irritation or allergic reactions. Large companies may have the resources to self-insure or secure coverage through specialized markets like Lloyd’s of London, but smaller entities might struggle.

Amazon and Product Liability: A Landmark Case

In the realm of online retail, Amazon stands as a giant, offering a platform for countless third-party sellers. A landmark case, Erie Insurance Co. v., highlighted the complexities of product liability in this modern marketplace.

The case involved a headlamp sold on Amazon that malfunctioned, leading to a fire and significant property damage. Erie Insurance, covering the property, paid the claim and sought to recover the costs from Amazon. The legal battle that ensued centered on whether Amazon could be held liable for products sold on its platform.

The Verdict and Its Implications

The court ultimately decided that Amazon was not the “seller” of the headlamp and, therefore, not liable under Maryland law for the product’s defective condition. This ruling set a precedent, significantly impacting how liability is assigned in the e-commerce space.

Ensuring Coverage for Your Products

This case underscores the importance of securing product liability insurance for your products. As a manufacturer or seller, it’s crucial that your insurance portfolio includes coverage for the items you create and sell. It’s not just about compliance. It’s about composure, knowing you’re protected against unforeseen events.

Get the Best Product Liability Insurance for Your CNY Operation

Building a successful business is a journey, not a destination. You have to take calculated risks, foster trust, and work hard to protect what you've built.

By understanding product liability and implementing the right safeguards, you can navigate challenges with composure and security. This empowers you to focus on what matters most: creating exceptional products and building lasting relationships with your customers.

An unforeseen product liability claim can disrupt your operations, damage your reputation, and even threaten the future of your business. Take control and equip yourself with the knowledge and resources you need to navigate this complex landscape.

We’re here to help. Click the Get a Quote button below to start your journey toward comprehensive coverage.

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Daniel J. Middleton

Daniel is an accomplished content creator. He has been working in publishing for almost two decades. Horan Companies hired Daniel as its content manager in November 2022. The agency entrusted its messaging to him. Since then, Daniel has written insurance articles, service and pillar pages, and more. All in an effort to educate CNY readers. He's helping them understand the world of insurance so they can make informed decisions.