As its name suggests, product liability insurance is a type of insurance that protects a business against losses that are due to product liability or defective product lawsuits. A product liability or defective product lawsuit may arise when a consumer purchases a business’s product and gets injured or suffers some other kind of loss that is caused by a defect with the product.

For example, suppose a kitchen appliance (like a dishwasher) malfunctions and causes a consumer to suffer an injury. If the consumer decides to file a lawsuit against the appliance manufacturer, the manufacturer’s product liability insurance may be able to cover some of the costs associated with the consumer’s lawsuit.

Similar to any type of insurance policy, a product liability insurance policy may contain various terms and restrictions over what kinds of expenses an insurance provider will cover.

For instance, it may cover costs associated with product liability litigation. However, it will usually not cover the costs of when a product is recalled or if a worker employed by the manufacturer gets injured while making the product. Instead, manufacturers would either need to purchase product recall insurance or employment insurance to insure themselves against costs related to those specific types of liabilities.

In addition, product liability insurance does not relieve the manufacturer or other similar business parties from any civil or criminal liability that stems from a violation of health and/or safety laws in a particular jurisdiction.

Finally, the most common types of business parties that will typically purchase a product liability insurance policy include general contractors, retailers or sellers, and manufacturers. This is especially true for businesses that deal in products and/or provide services that can be found in the construction and contracting industry.

What Are Some Common Product Liability Insurance Disputes?

Similar to many types of disputes that involve a business insurance policy, a dispute may arise not only between a consumer and a business, but also between the business and the insurance provider itself.

Some common disputes that may come up in connection with a product liability insurance policy include the following:

  • There can be a dispute over the amount of damages that an insurance company may be willing to cover. For example, a policy may state that an insurance provider promises to cover up to a certain amount of damages for the company in the event of a product liability lawsuit.

    • If the insurance provider refuses to provide these funds when such a lawsuit arises, then this can lead to a separate legal issue between the business and insurance provider.
  • A separate legal issue can also occur when there is a dispute over the amount of premium payments made each month. For instance, if the business contracted with an insurance provider to pay a certain amount of expenses each month to cover their premium payments and the insurance provider raises that amount without a new insurance policy or contract, then this could also lead to a separate legal issue.
  • If a business is late or misses their monthly premium payment amount for a couple of months, then the insurance provider may hold them accountable for these payments by either filing a lawsuit against the business in court or by issuing a lien against their business accounts and/or equipment or inventory owned by the business.
  • An insurance provider or business may also encounter an issue if one or both of the parties breach the terms of the insurance contract or policy. For instance, not covering losses in accordance with the terms of the policy or failing to pay the monthly premium payment amounts that the parties initially agreed to when they entered into the policy together, could constitute a breach of the insurance contract or policy.
  • One other kind of dispute that can occur between a business and their insurance provider is when there is an issue over the end date of a contract or a renewal provision. For example, a business may argue that they do not want to re-sign with a particular insurance provider once their contract expires.

    • However, if the business did not give their insurance provider the requisite amount of days required to provide notice that they do not intend to renew with their insurance provider, then the insurance provider may be able to sue for damages resulting from a failure to provide notice. The insurance provider would also be able to file a breach of contract claim against the business.

Lastly, it should be noted that a product liability insurance provider can also cancel a business’s policy. This can happen if they fail to pay the proper amount of premium payments each month or if the business committed fraud in order to obtain their product liability insurance policy. In a case involving insurance fraud, the business or a provider may face both civil and criminal penalties for such conduct.

What If I Have a Dispute over Product Liability Insurance Terms or Contracts?

Disputes over the terms of a contract involving product liability insurance can often become complicated matters. If an individual or business finds themselves entangled in a dispute over a product liability insurance policy, then they may want to consider taking the following steps so that they can resolve it quicker, such as:

  • A person or business should first review their contract to make sure that they understand the legal obligations of all parties to the product liability insurance contract. Reviewing the terms of a contract or a product liability insurance policy can sometimes also reveal key information that can help clarify the solution to a dispute.
  • If communicating with the other disputing party does not resolve the issue, then the disputing parties should each retain their own separate legal counsel for further assistance. Oftentimes, the laws and legal issues involved in such matters can be very complex and may require the assistance of a legal expert or may need a court to intervene in order to formally resolve the dispute in question.
  • All parties involved in the dispute should also be sure to compile any relevant documents that could be used as supporting evidence. For instance, any sales receipts, consumer claims, intake documents, and so forth are all helpful and can be used in the event that the dispute goes to trial.

In addition, it is important that an individual or business review the laws of their particular state as well as their insurance policy. If the laws seem unclear or they do not understand a term in their insurance policy, then this is when the parties should strongly consider hiring legal counsel to assist them with such tasks.

Finally, it should also be noted that each jurisdiction will have slightly different insurance rules and thus the outcome of an insurance liability dispute may vary by state.

Should I Hire a Lawyer for Help with Product Liability Insurance Issues?

Obtaining a policy for product liability insurance is an integral part of maintaining and operating a successful business. Not only can this kind of insurance policy save your business money in the long run, but it can also protect your business from multiple types of product liability claims. It may even provide you funds to pay for a legal defense against frivolous lawsuits.

Thus, if you or your business are experiencing issues with a policy for product liability insurance, then it may be in your best interest to hire a local business lawyer as soon as possible. An experienced business lawyer will be able to review and can explain what is covered under your particular policy. Your lawyer can also make sure that it is valid under the laws in your jurisdiction.

In addition, your lawyer can assist you in filing a lawsuit, or alternatively, can provide representation if you are being sued for injuries resulting from a defective product. Lastly, if you need to amend or modify a policy for product liability insurance, your lawyer can also work with your insurance company to get this accomplished as well.