Three Ways to Mitigate Your Risk of Product Defect Claims
If your company manufactures or sells a product then there is always a chance that the product can be said to have a defect. Should the alleged defect cause a consumer injury or property damage, your business could be held legally liable.
Businesses have typically managed the risks associated with product defects in three ways: through product liability insurance, third-party testing and hiring a product liability attorney. It is highly recommended that every manufacturer (as well as the distributors of the products) invest in all three methods below to transfer and reduce the risk of product liability claims for alleged defects.
Invest in Product Liability Insurance
Product liability insurance is designed to pay for the legal costs associated with defending against claims of alleged product defects. Product liability insurance serves a similar purpose to general liability insurance but with specific clauses that cover product defects. For the cost of a premium, the policy is designed to pay out if any third party takes legal action against you due to injuries or damages caused by the product you have manufactured, sold or repaired.
It is wise to ensure that your suppliers, testers, distributors and others involved with the manufacture and sale of your product are also covered by separate product liability insurance policies. Together, you and your delivery partners form a “liability chain” that can be sued in part or wholly by any consumer who feels that they have a legally viable case. In the event that a consumer’s claim is successful, businesses in the liability chain without product liability insurance may be forced to close or interrupt business due to the potentially large sums demanded by consumers in these cases. The resulting business interruptions could affect your product’s supply chain and make it difficult for you to get your product to the market.
Making sure that all parties you work with are insured protects all points of your supply chain and avoids costly business interruption scenarios.
Use a Third Party for Product Testing
In addition to thoroughly testing your product “in house”, it is best practice to also outsource testing of your product to a third party. An outside party that is dedicated to testing is more likely to catch potential defects and identify weak or risky areas in your product. Be sure to take action, once these weak points have been identified. It is essential that once a paper trail has been created showing that a weakness has been spotted, that the manufacturer takes action to remediate it!
In addition to increasing the reliability of your product, third party testing further distributes the risk by creating an additional member of the liability chain. It is highly recommended that your testing partner is also covered by product liability insurance for your product. As mentioned above, all custodians of your product should be covered in case a consumer claim is made against multiple points in your supply chain.
“An outside party that is dedicated to testing [your product] is more likely to catch potential defects…”
Hire An Experienced Product Liability Attorney
Hiring a competent lawyer with experience in product liability is an important strategic move you can make as a manufacturer or member of a product’s supply chain. A lawyer can help you take proactive steps to further mitigate your risk including drafting and reviewing your contracts with partners in your supply chain, providing guidance for your product manual and advising on labeling and aspects of product design.
The best time to take action to protect your business is before a claim is made. However, having the backing of a competent and experienced product liability lawyer prior to legal conflict is helpful should a claim occur. It is much easier for you and your lawyer to run a successful legal defense when you have been working together prior to a claim having been made.
South Florida Law Protects You and Your Brand
At South Florida Law, we are committed to helping manufacturers, distributors and insurance companies manage their risk with proactive legal advice regarding claims related to product liability. We help our clients avoid unnecessary liability and legal actions that can negatively impact profitability and business continuation. Although it is best to be brought in as legal counsel prior to a claim, we have the big firm resources to aggressively defend against legal opponents in litigation and arbitrations should legal action be taken against our clients. At the same time, we provide personalized service and attention to detail in your case at a price point that can only be achieved with a boutique firm of our size. Is your company faced with challenges related to product liability claims? Are you facing legal action as a result of a consumer’s negligence or a frivolous claim? Call South Florida Law today on (954) 900-8885 or reach out to us via our contact form.