Product Liability Insurance

🛡️ Product Liability Insurance in the U.S.

🔍 What Is Product Liability Insurance?

Product Liability Insurance is a specialized form of commercial insurance designed to protect manufacturers, distributors, wholesalers, and retailers against legal claims arising from defective or dangerous products. In the U.S., businesses can be held strictly liable for bodily injury or property damage caused by products they design, make, or sell — even if there was no negligence.

This insurance covers legal defense costs, court judgments, settlements, and associated expenses when claims allege that a product was:

• Defectively manufactured
• Defectively designed
• Improperly labeled or lacked adequate warnings

🏭 Who Needs Product Liability Insurance?

Product Liability Insurance is not just for major manufacturers — it’s essential for any business that plays a role in the product supply chain. Under U.S. tort law, any party involved in designing, producing, distributing, or selling a product can be held strictly liable if that product causes harm.

Here’s a deeper look at the types of businesses that must consider this coverage:

✅ Manufacturers and Assemblers

Companies that design or fabricate physical products, whether on a mass scale or in small batches, face the highest level of exposure. This includes:

• Consumer electronics and home appliances
• Auto parts and aftermarket components
• Industrial machinery and tools
• Medical devices and supplements
• Toys, furniture, cosmetics, and personal care items

Even minor manufacturing defects—like a misaligned part or contaminated ingredient—can result in multi-million-dollar claims.

✅ Importers and Exporters

Businesses that import foreign-made products into the U.S. are legally treated as the manufacturer in the eyes of the law. This means liability transfers entirely to the importer if a product causes injury or damage.
This includes:

• Dropshippers sourcing from overseas factories
• Private freight importers
• Global e-commerce traders

Having a robust Product Liability policy is critical when sourcing internationally, where quality control may vary.

✅ Private Label & White-Label Brands

If you rebrand and sell products made by another company, you’re not shielded from legal claims. U.S. courts often consider branding and marketing a form of implied manufacturer responsibility.
Common industries:

• Health & wellness products
• Food and beverage packaging
• Home goods and décor
• Subscription boxes

If it’s your brand name on the product, you are liable for what happens after the sale.

✅ Wholesalers, Distributors & Retailers

Even if your business doesn’t alter or repackage the product, you can still be sued as part of the supply chain. This includes:

• Brick-and-mortar retailers
• Wholesalers selling to resellers
• Distributors moving products between regions or sectors

You may face liability for:

• Failing to warn of risks
• Selling expired or recalled items
• Storing or transporting goods improperly

✅ E-Commerce & Online Sellers

Online marketplaces have become a legal gray area — but courts increasingly hold online retailers responsible for product safety, even if the platform just facilitates the sale.
This especially affects:

• Amazon FBA sellers
• Shopify/Dropshipping businesses
• Etsy, eBay, and Walmart Marketplace vendors

🔒 Important: As of 2021, Amazon requires sellers earning $10,000+ per month to carry Product Liability Insurance and list Amazon as an additional insured. Failure to comply can lead to account suspension or withheld payouts.ry Product Liability Insurance as part of their seller agreement.

⚠️ Real-World Examples

• A children’s toy with a choking hazard leads to a $500,000 lawsuit.
• A beauty product causes chemical burns, resulting in a class-action settlement.
• A smartphone battery overheats and causes fire damage to a home.
• A food manufacturer faces a contamination claim resulting in a multi-million-dollar recall.

Product liability claims are increasingly common — and can devastate a small business without proper coverage.

🎯 What Does Product Liability Insurance Typically Cover?

Policies generally include:

• ✅ Legal defense costs, including attorney fees and court expenses
• ✅ Judgments and settlements awarded to injured parties
• ✅ Claims related to manufacturing, design, and labeling defects
• ✅ Product recall expenses (optional with some policies)
• ✅ Worldwide coverage (depending on policy structure)

Common Exclusions:

• Intentional wrongdoing or fraud
• Contractual liability (e.g., warranty disputes)
• Known defects prior to policy issuance
• Cyber-related product failures (requires Tech E&O or Cyber Insurance)

📘 Differences from General Liability Insurance

While General Liability Insurance covers third-party injury or property damage from business operations (e.g., someone slipping in your store), it does not automatically include product-related injury claims once a product has been sold or shipped.

Product Liability Insurance is a critical supplement or endorsement to general liability policies — particularly for businesses involved in physical goods.

💡 Tips for Choosing Coverage

• Verify whether coverage is included in your Commercial General Liability (CGL) policy or requires a separate rider.
• Ensure you have sufficient per-claim and aggregate limits, especially if you sell high-risk products (e.g., food, medical devices).
• Ask your agent about retroactive dates, which determine how far back coverage will apply.
• Consider global liability extensions if you ship internationally.

🏢 Top 5 U.S. Product Liability Insurance Providers

Here are five respected insurers offering strong Product Liability solutions:

1. The Hartford

• Website: www.thehartford.com
• Phone: 1-866-467-8730
• Specialization: Small to midsize manufacturers, consumer products

2. Chubb

• Website: www.chubb.com
• Phone: 1-866-324-8222
• Specialization: Life sciences, technology, industrial goods

3. Travelers

• Website: www.travelers.com
• Phone: 1-866-336-2077
• Specialization: Broad industry support, recall expense add-ons

4. Nationwide

• Website: www.nationwide.com
• Phone: 1-877-669-6877
• Specialization: Online sellers, startups, e-commerce

5. Liberty Mutual

• Website: www.business.libertymutual.com
• Phone: 1-800-290-8206
• Specialization: International manufacturers and wholesalers

Read more:

Business Insurance in the U.S. – Business Insurance in the U.S.

Business Insurance in Florida – Business Insurance in Florida

Business Interruption Insurance – Business Interruption Insurance

Commercial Property Insurance – Commercial Property Insurance

Directors & Officers Insurance – Directors & Officers Insurance

Cyber Liability Insurance – Cyber Liability Insurance

General Liability Insurance – General Liability Insurance

Insurance for a Small Business – Insurance for a Small Business