Strict liability

Strict liability is the responsibility that manufacturers, wholesalers, distributors, or retailers have for damages or injuries in cases where there was no fault or negligence. Strict liability normally applies in three situations: when dangerous animals are involved, when someone engages in highly dangerous activities, or when a defective product hurts someone or damages property.

Strict product liability relaxes the burden of proof a plaintiff must meet in pursuing legal action against a small business. As a result, it makes running a business much riskier than under standard liability rules.

In practice, this means businesses that design, manufacture, wholesale, or sell products need robust liability insurance to protect them in case they’re sued under strict liability rules.

Standard general liability insurance provides coverage for product liability lawsuits under the products and completed operations aggregate limit. However, if your firm manufactures or sells high-risk products, you may want to boost your protection by adding a product liability endorsement to your general liability policy.

Another option is to purchase a stand-alone product liability insurance plan. Contact an Insureon agent to evaluate your product risks and how to mitigate them with insurance.

Product liability means the product you designed, produced, distributed, or sold had a defect that ended up hurting the purchaser of the product. Alternatively, it might have damaged the buyer’s personal or business property.

Defects are at the core of product liability lawsuits. Normally, plaintiffs will allege that the small business sold a product that had:

A manufacturing defect: This is a problem in a mass-produced product that made it more dangerous to use and that caused customer injury or property damage. Selling a defective product automatically exposes you to strict liability even though you took reasonable steps to assure the product was free of defects.

A design defect: A manufacturing defect normally only applies to isolated units that leave production with a flaw. However, a design issue produces an entire product line with defects.

In addition, plaintiffs might allege that the business failed to warn them of the inherent, but not necessarily obvious, dangers of using a product. For example, a candy bar manufacturer might include a warning on its product labels that it made the candy on equipment exposed to peanuts. This warns consumers with peanut allergies to avoid eating those candy bars. Not putting that warning on the label might subject the candy manufacturer to consumer lawsuits for failure to warn.

First and foremost, plaintiffs must prove that:

• The product they purchased had a defect.
• The defect resulted in them suffering property damage or bodily injury.
• The defect made the product unreasonably hazardous to use.

No, those without a direct relationship to the product – bystanders, guests, family members, and others – still have grounds to sue if a product defect hurts them or damages their property.

If you’re sued under a strict liability tort (wrongful act) scenario, your attorney may raise one or more common legal defenses. These include:

Assumption of risk: Here your lawyer will try to prove the plaintiff knew or should have known about the risk of operating the product and that the person voluntarily assumed that risk.

Federal regulation: Your attorney may also argue that you complied with all relevant federal safety regulations, making you immune from strict liability exposure.

Statute of limitations: Finally, your attorney might try to convince a judge that the plaintiff failed to file the claim soon enough after the loss was discovered (or should have been discovered).

The key is to focus on liability exposures when a product is being designed:

• Rely on your engineers and legal team to identify potential defects and safety concerns before a product enters manufacturing.
• Review customer feedback from similar products to identify problem areas.
• Finally, be sure to invest in comprehensive product label warnings as well as detailed user manuals. This will help you to establish assumption of risk if and when a consumer sues you over an alleged product defect.

Insureon helps small business owners compare business insurance quotes with one easy online application. Start an application today to protect yourself against strict liability claims arising from your product design, manufacturing, and sales activities.