If you own a small business that sells products, you should ensure compliance with Australian laws related to product liability. The insurance policy covers manufacturers, distributors and retailers of various products. If your business supplies or delivers goods, you might be liable if the product leads to a third party's injury or death. If your product causes property damage or nervous shocks, such as psychiatric illness or emotional distress, you could be liable for any safety defects related to the commodity. You can avoid such liabilities by taking product liability insurance. Remember that the insurance option might form part of a broader public liability policy. Read on to learn more about product liability insurance for small businesses.
Product Liability Explained
If your business avails products for public use, you can be held legally responsible for injuries, death, property damage and nervous shock, which might arise from using the item. Product liability applies to any entity in a commercial supply chain, including manufacturers, distributors, suppliers and retailers. Suppose your business is sued for selling a defective product. In that case, a court considers factors such as its quality, loss or damage stemming from the commodity and how your business represented the product through warning labels and packaging. A product liability insurance ensures that your company is covered if you are sued for availing a defective product to consumers. Similarly, the insurance covers legal costs and the cost of compensation if a court finds your product flawed.
External Parties
Note that product liability insurance covers claims made against your business by external parties. Workers' compensation insurance covers claims made by your employees. Product liability insurance may cover incidents that happen within your business premises and those that occur at other locations but involve the product you sell or supply. Any third party, such as an individual or another business, can claim personal injury or damage to property arising from your product. Notably, the claim can be costly in terms of compensating third parties. Even if a court determines that your business is not at fault, you still have to incur substantial legal costs for defending a claim brought by external parties.
Benefits of Product Liability Insurance
With more and more consumers knowing their rights regarding specific products, your business becomes susceptible to third-party claims related to injuries and property damage arising from the use of your product. Small businesses are vulnerable to such claims because they can affect their financial bottom line if they have not taken out product liability insurance.
Contact a local business insurance provider to learn more.
