When Products Go Wrong: The Coverage Every Seller Needs

​No matter how careful a business is, no product is completely immune to failure. From faulty electronics to mislabeled food products, even the most reputable brands can find themselves facing costly claims when things go wrong. If you’re in the business of selling, manufacturing, distributing, or importing products, there’s one type of insurance you can’t afford to overlook: Product Liability Insurance.
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This specialized coverage protects your business when a product causes harm to a customer or their property—whether due to a defect, design flaw, or improper instructions. Without it, a single lawsuit could devastate your finances and damage your reputation.

What Is Product Liability Insurance?
Product liability insurance provides protection against claims arising from product-related injuries, property damage, or financial losses. It’s designed for businesses that make, sell, or handle physical goods—including manufacturers, retailers, wholesalers, and even online sellers.

It typically covers:

• Design defects
• Manufacturing defects
• Marketing defects (e.g., incorrect labeling or missing safety warnings)

Why Product Liability Insurance Is So Important
Even if you didn’t design or manufacture a product, your business can still be held legally responsible if that product causes harm. For example:

• A retailer could be sued for selling a defective appliance that causes a fire.
• A distributor might face legal action over a mislabeled food product that triggers a customer’s allergic reaction.
• An e-commerce seller could be named in a lawsuit due to injuries caused by a product sourced from a third party.

In today’s litigious environment, product liability claims are rising, and even a small business could be targeted. With average claims ranging from $30,000 to over $1 million, having the right coverage is essential to staying in business.


What Does Product Liability Insurance Typically Cover?

1. Legal Defense Costs
   Covers attorney fees, court costs, and settlements—even if you're not at fault.
   
   
2. Medical Expenses and Damages
   Pays for injuries or illnesses caused by the product, such as burns, cuts, or allergic reactions.
   
   
3. Property Damage
   Covers claims for damage to a customer’s property due to a faulty or malfunctioning product.
   
   
4. Judgments and Settlements
   Pays court-ordered damages or settlements resulting from lawsuits.
   
   
5. Product Recall Expenses (in some policies)
   May cover the cost of recalling a defective or dangerous product.

Who Needs Product Liability Insurance?
If your business does any of the following, you should strongly consider product liability insurance:

• Manufactures or assembles goods
• Distributes or wholesales products
• Sells physical products (online or in-store)
• Imports foreign-made items for U.S. sale
• Applies branding or private labels to third-party products

Even if you believe the risk is low, the potential cost of one defective item reaching the public can be catastrophic.


How to Minimize Product Liability Risk
While insurance is crucial, prevention is equally important. Here’s how you can reduce your exposure:

1. Ensure Quality Control Standards
   Implement strict testing and quality assurance processes.
   
   
2. Maintain Clear Labeling and Instructions
   Include safety warnings and usage directions with all products.
   
   
3. Keep Detailed Records
   Track batch numbers, supplier info, and distribution channels for easy traceability.
   
   
4. Monitor Customer Feedback
   Quickly investigate complaints or reports of malfunctioning items.
   
   
5. Work with Reputable Manufacturers
   Vet your suppliers and partners thoroughly before doing business.

Final Thoughts
When products go wrong, product liability insurance is the safety net that keeps your business standing. From accidental injuries to unexpected product failures, this coverage can shield your company from devastating financial loss and legal complications.

Don’t wait until it’s too late. If your business deals with physical goods in any way, it’s time to review your risk exposure and ensure you have the right protection in place.

Take action today:

• Assess your current insurance policy.
• Speak with a licensed commercial insurance agent.
• Make sure your business is covered—before your product ends up in the headlines.

Because in business, it’s not just about what you sell—it’s about how well you're protected when things go wrong.

​At Appletree Insurance, we do our best in making sure that our clients are well-protected with affordable and comprehensive policies. We make sure to go the extra mile to help you with your needs. To learn more about how we can help you, please contact our agency at (603) 881-9900 or CLICK HERE ​to request a free quote. 

Disclaimer: The information presented in this blog is intended for informational purposes only and should not be considered as professional advice. It is crucial to consult with a qualified insurance agent or professional for personalized advice tailored to your specific circumstances. They can provide expert guidance and help you make informed decisions regarding your insurance needs.