Goods manufacturing is an important part of the American economy. Manufacturers in every state produce products that are shipped domestically and internationally to end consumers. These manufacturers have a duty to produce safe products; a defective product can result in injury or death and represents a severe risk exposure to the manufacturer itself. In the state, Utah manufacturers insurance is designed to cover state manufacturers against product liability claims. In this guide, we will explore product liability insurance and how it works to protect business assets against losses.
Product Liability: The Facts
Within the thousands of different products manufactured each year, there are a small number of incidents where defective items cause injury. Those injured may choose to file a legal claim against the manufacturer, referred to as a product liability lawsuit. A manufacturing business may be held liable for an injury or death if the plaintiff can prove:
- The product was designed or manufactured with defects.
- That defective product caused the injury or death.
- The injury or death resulting from the use of the product caused financial losses.
- The manufacturer, designer, or retailer had a duty to ensure their products were safe.
Product liability risks loom large not only for the manufacturer, but any business entity that had a part in the production or sale of defective products. This can include product designers, distributors, wholesalers, and retail establishments. The Insurance Information Institute compiles data on insurance claims resulting from product liability lawsuits; the average settlement in these cases exceeds $1.5 million. For smaller businesses, these expenses can be devastating, especially without the protection of manufacturers insurance or similar coverages.
Understanding Defective Products
In general, a defective product is defined as any item that is unfit or unsafe for its intended purpose. The use of these products may cause injury to others. Several examples of defective products include all three primary types of design, manufacturing, or marketing defects:
- Items with substandard or unsafe parts
- Items manufactured incorrectly or contaminated by unsafe materials
- Items missing adequate warning labels
- Items designed in such a way that even if consumers are using the product correctly, they may be hurt
- Inadequate instructions for use
- Items marketed with misleading or unsafe claims that lead to injury or death
State manufacturers know that Utah manufacturers insurance is a critical part of risk management. Even if products are designed and produced according to safe practices, an undiscovered manufacturing or design error or a feature that lacks adequate warnings can result in an expensive legal claim, potentially putting the business at risk.
Expenses Associated with Product Liability Claims
Many manufacturers have learned that a defective product can mean far more than a judgement or settlement for those injured by the product. There are other expenses associated with product liability claims, including:
- Damage to or loss of business reputation (reputational harm)
- Public relations campaigns to warn consumers
- Recalls of defective products
- Reimbursement to consumers who purchased the product
- Regulatory penalties and fines
Faced with these potential expenses, manufacturers in Utah and other U.S. states must protect themselves against liability claims. Utah manufacturers insurance serves as a part of a comprehensive risk management approach for state manufacturers.
Protecting Against Losses with Utah Manufacturers Insurance
Not all general business liability policies protect against product liability claims; it is imperative for manufacturers to obtain product liability endorsements or riders to existing insurance coverages. Specialized Utah manufacturers insurance policies are available, forming the foundation for reducing manufacturing risks. Manufacturers must also follow best practices in terms of design, manufacture, and sale of their products to minimize risk exposures. More importantly, these practices help to keep consumers safe against injuries resulting from defective products.
About BTC Insurance Services
Founded in 2011, BTC Insurance Services has proudly served Utah businesses with comprehensive and custom-tailored insurance coverages for a decade. We pride ourselves on fostering long-term client relationships with a personalized and hands-on approach, and have established a reputation built on quality and transparency. For more information about our products and services, we invite you to contact one of our reputable agents today at (855) 944-3457, or send us a message here.