If you have been in retail for any time, you are aware that product liability claims and product recalls can have a huge impact on your bottom line. As a retailer, you may think that your exposure to product liability claims is minimal- any claims should be brought against the manufacturer, right. Not necessarily. This article reviews some of the steps you should take to ensure that your business insurance protects you from product related law suits, no matter the size.
If you are in the business of selling the products of others, it is imperative (and usually an insurance requirement) that you request to be named as “additional insured” on the Products Liability policy of the manufacturer, supplier, importer or distributor. Do not be shy about requesting this additional coverage from your supplier. Any reputable supplier has a blanket additional insured endorsement on their Products Liability policy that will offer your business protection, but you have to ask for it to get it. Furthermore, don’t just take their work for it; request a certificate of insurance documenting your coverage and keep it on file. Request an updated certificate each year.
If your supplier refuses to name you as Additional insured on their Product Liability insurance, this is a warning sign that you should not ignore. Chances are that the company you are dealing with doesn’t have the coverage in place. Product Liability insurance policies for manufacturers are quite expensive – they may have let the coverage lapse. If you are not able to get the additional insured coverage from a particular supplier, find another.
If you import products from overseas, don’t think that the manufacturer’s Foreign Product Liability policy, if they have one, will cover claims under US jurisdiction. Most do not. If your supplies are coming from overseas, discuss product liability with them. Request additional insured status and confirm that the policy territory includes the US and its territories. Even after taking all appropriate measures with foreign suppliers, you may still be left defending yourself against a claim. Speak with your own General Liability insurance company or agent to find ways to cover any potential gaps that you may have.
The insurance industry, in general, has low confidence in Chinese products. Often coverage for Chinese supplies, parts, or products are excluded from domestic Product Liability insurance policies. If you are using such products or materials, your insurance company probably requested that you disclose that information on an insurance application. Though the cost of a separate policy covering Product Liability and Product Recall for these products may make you faint, it pales in comparison to the price of going uninsured.
The retail business is complicated and ever changing. One thing is certain: products liability (especially for foreign products) will only get more complicated. With the right commercial insurance policies in place, products lawsuits can be one less thing you have to worry about.
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