Things To Know About Product Liabilities For Business Start-Ups


Start-up business owners who want to sell new and fantastic products must first understand what product liability is all about. As a business owner who sells products, it is your responsibility to ensure that the products you’re selling are safe.

In this article, we will talk about product liabilities for business start-ups and how you can avoid any harsh consequences.

What is Product Liability?

Businesses that sell products have a responsibility to make sure the products they sell are safe for their consumers. Product liability is the legal liability imposed on businesses and manufacturers selling defective products.

Product liability is one of the best ways to ensure consumer protection. Customers and consumers shouldn’t be harmed by products they buy from businesses and manufacturers.

If a customer has bought a defective product and it has harmed them, they have the right to file a lawsuit against that business or manufacturer in court.

Why You Need to Know Product Liability as a Business Start-Up?

It is common sense for businesses that sell products or produce products to have product liability insurance in place. If a customer or consumer claims to be allegedly hurt or harmed by one of your products, your product liability insurance will help protect your business from legal consequences and damages.

Claims arising from the quality of your products may come at you from different angles such as:

  • Design defects. This occurs if there is a design flaw in your product and it has caused injury or damage to your customers. For instance, if a cell phone battery has a tendency to explode when it’s overheated.
  • Manufacturing defects. This occurs if a flaw in the manufacturing process has caused injury or damage. The product may be designed flawlessly, but perhaps there was a flaw in the manufacturing process. Manufacturing defects are often one-off instances that are not noticed by quality controllers.
  • Improper instructions or lack of warnings. If the instructions on how to use the product were poorly written or there is no instruction or warning stated at all on the product, this can lead to misuse of the product and cause injury to the consumer.

Product Liability Insurance Requirements

All business start-ups need product liability insurance in order to handle liability that may arise from the above listed types of claims. In fact, product liability insurance is one of the most important business insurances that you need to secure before starting operations.

Business start-ups that introduce a new product to the market must secure product liability insurance. The law requires all businesses, new or old, small or large, make sure that all the products they sell or manufacture are safe for their consumers. As a business start-up, it is your duty to:

  • Provide as much information as you can about your product
  • Inform your consumers about the potential risks from using your product
  • Monitor the safety of your product
  • Take immediate action when a defective product has caused injury or damage to your consumers.

What Can Product Liability Insurance Do For You?

If you manage to secure product liability insurance for your business, it will help cover you from any injuries caused by your products as well as loss or damage caused by the faultiness of your goods, and other unforeseeable circumstances that may result from a design flaw in your product.

There are two types of claims that product liability insurance can protect against:

  • Personal injury. In case someone gets injured using your product, your product liability insurance can cover the medical expenses, wages lost, restitution for death (if someone has died), or legal fees (if the claim was taken to court).
  • Damage to property. If your product has caused damage to property, your product liability insurance can cover the physical damage, lost profit due to property damage, repairs, and legal fees ( if the claim was taken to court).

Like other insurance policies, product liability insurance also has exclusions which include:

  • Quality control exclusions. If your product has not undergone quality control or does not pass quality control.
  • Reporting exclusions. If you fail to report changes in your manufacturing process.
  • Efficacy exclusions. If your product has failed to perform its main function.
  • Material exclusions. If your product contains a forbidden or illegal material.

Product liability insurance is important for all business start-ups. Most business start-ups don’t have the resources to protect themselves and keep their business running. But if you have product liability insurance, you won’t have to worry that much if something goes wrong because of your product. However, the said type of insurance can only do so much to protect your business from being sued by a customer who had a bad experience with your product, especially with the previously mentioned exclusions in place. If ever you find yourself needing more knowledge about business law, you may contact a lawyer in this site who can help you explore all the legal remedies available at your disposal.

Lilly Jordan

Lilly Jordan has been a law writer for more than 20 years, and she hopes to impart legal wisdom to the common reader through her works. She is currently working on a new law piece. A certified “foodie,” Lilly loves to cook for her friends and family. She often tries new dishes whenever she has free time.

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