PRODUCT LIABILITY INSURANCE by Ed Sneneh,  Illinois Insurance Producer

The primary goal of products liability insurance is to give protection and pay for damages imposed upon an insured person/ business, by reason of lawsuit or legal action, for property damages and/ or bodily injuries resulting from the insured’s product, if such damages and/ or injuries take place after the insured has finished designing/ making and packaging the product  of which the accident happens.

Under conventional traditions of contract law, which basically come from the customs of historical marketplaces, makers, distributors  and sellers of products were primarily responsible only to their immediate buys for injuries resulting from the use of  their defective products. For that reason, a third party who either possessed the product from the buyer (ie as a gift) or suffered bodily injury as a bystander could not recover from the maker, distributor or retailer. However things have changed in the past four decades where an injured third party with no direct relationship  to a manufacturer, distributor or retailer of a product manage  to recover for damages sustained as a result of a defect in that product. The trend in the modern product liability laws reflect more sophisticated needs for product liability in our society.

Products Liability Laws in The USA

The modern legal system recognizes that all the parties including the maker, distributor, and retailer of the product dow owe certain duties to anyone who foreseeably may come in contact, directly or indirectly,  with their products. Injured parties and victims of product liability claims may be entitled to recover for the damages they suffered based upon certain different assumptions of liability including negligence, fraud, misrepresentation, and the breach of warranty.

Maker of a product, or the manufacturer, owes a duty to practice reasonable care in the designing process, manufacturing process and the distribution and packing process. The maker also is required to warn of any risks or dangers associated with the use of the product that are not clear for the average prudent man. Any breach or negligent performance of these obligations and duties may lead to a  liability issue for the manufacturer.

In legal contracts including insurance warranties can be express or implied. Express warranties are the seller's or the manufacturer's statements affirmation or fact or promise made concerning the product conformity to certain standards and promise of performance. This is true even if the manufacturer or the seller refrained from using the proper words of 'guarantees' or 'warranties'. On the other hand, an implied warranty comes when the customer makes known to the merchant or manufacturer and advise them about the particular need of the customer and the purpose for which the product is to be used  by the customer. The customer here is  relying upon the merchant's skill and judgment to choose or provide a suitable product. When a merchant sells products, an implied warranty of merchantability  exist  - that the product are suitable for the normal purpose for which the products are used. Here, an injured person can collect for bodily injury or property damage caused by breach of any of those warranties.

An injured person or victim of bad product may also collect for damages from a merchant of a defective and unreasonably dangerous products, even though the merchant has exercised reasonable care in the design, manufacturing and marketing process of the product. Collecting for damages here are under the assumption that the merchant should assume strict liability.

Products Liability Coverage and CGL

Products liability coverage exist in most commercial policies and is usually contained in a Comprehensive General Liability Policy purchased by the businesses. This coverage may be included in many types of policies such as restaurants, grocery stores, taverns druggists’ or storekeepers’ liability insurance. Most companies will be reluctant to offer this coverage alone. Normally it is offered along with Premises Liability, and is called Products-Completed Operations Liability.

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