A product liability insurance policy protects companies in the even that products they manufacture injure someone or cause property damage. Product liability insurance is particularly important for businesses that deal in product manufacturing and production. It protects a business financially in the case of a lawsuit claiming product defects. Manufacturers are legally responsible for damages that may arise from the use of their products. The manufacturer has the responsibility to ensure that products are of high quality. Most liability claims are covered by a company’s commercial general liability policy (CGL). CGL policies generally cover bodily injury and property damage that occurs off business property that is the result of a product. Unfortunately, CGL policies do not cover damages to a product when the damage was caused by a faulty part or faulty workmanship during manufacture. If the manufacturer of the equipment is also the manufacturer of the faulty part, CGL policies do not cover damages. A product liability insurance policy goes further than a CGL policy and can be purchased independently of CGL.
Having product liability insurance is especially important for partnerships and sole proprietors. Unlike corporations, these business owners do not have a corporate shield to hide behind in the case of a lawsuit. Product liability exposure lasts as long as a product is in use even if the product is no longer in production. Therefore, your product liability insurance policy should be kept in force as long as the possibility remains that a product is in use and could cause injury or damage.