As outrageous as some product liability lawsuits can be – such as in cases wherein restaurants are sued for coffee that is deemed “too hot” – the truth is that they generally help improve the standards for the quality, safety and reliability of products. Such stringent requirements and dire consequences may be daunting for a company attempting to break into any business, but these are the exact same measures that help protect both the business sector and consumers.
Below are two cases that will hopefully be a reminder of the importance of having product liability insurance – to protect yourself, your business and your valued customers.
Case #1: Machine Malfunction Causes Crushing Lawsuit
A female worker was running a compactor/baler machine manufactured by Arrow Steel Inc. when the machine suddenly malfunctioned for no apparent reason. In an attempt to make the machine work, her right arm was caught in the machine’s mechanism. The incident caused multiple injuries to the worker’s arm, including several crush fractures, lacerations, abrasions and contusions.
The worker decided to sue the manufacturer for strict liability, claiming that the machine was defective, unfit and dangerous for ordinary use. She also claimed that the compactor/baler was carelessly designed, assembled, distributed, sold, tested and marketed.
The defendant manufacturer, on the other hand, contested that the unfortunate incident was, at least partially, the plaintiff’s fault. It denied that the machine was in any way defective. Furthermore, the company argued that the compactor/baler was being misused and was subjected to alterations by a third party.
On the day of the trial, the plaintiff and defendant reached a settlement that amounted to $750,000.
Case #2: Million-Dollar Lethal Beef
A beef supplier was sued for product liability and negligence when a 70-year-old female customer got sick and eventually died after consuming its allegedly tainted ground beef bought at a local supermarket.
On behalf of the decedent, the plaintiff brought the case forward against the beef manufacturer, whose product was found to be infected with E. coli bacteria. This reportedly caused the decedent to experience severe gastrointestinal and respiratory conditions that led to her death in a hospital.
In its defense, the meat supplier disputed the direct connection of the decedent’s death to its product. Despite the defendant’s denial of all allegations, the plaintiff maintained that the beef supplier was not only negligent in putting a dangerously defective product on the market; it also failed to issue any warning to consumers.
In the end, the parties agreed on a $1,200,000 settlement.
How Much Product Liability Coverage Do You Need?
The short answer is that $1 million is often inadequate, as shown by the second real-life case featured above. Unfortunately, many business owners still believe – or insist to believe – otherwise, risking not only the security of their business but possibly their entire livelihood.
Most general liability policies include product liability, but some may exclude this coverage. Some policies only provide $1 million per incident or $2 million for total losses occurring in a single year. While this amount may seem like an adequate protection for a sizable business, it offers grossly inadequate protection against a worst-case scenario wherein several multi-million-dollar lawsuits are brought forward at the same time or within the same year.
One way of reinforcing protection against such a probability is to increase your limits of coverage – and for many business types, this will not significantly raise your premiums. Another is to buy either an umbrella or excess liability policy on top of your general liability coverage. Doing so may raise your coverage to as much as $25 million or higher.
How adequate is adequate insurance? Review your risk and contact your agent or your attorney to discuss what coverage limits and additional policies will best benefit your business.