As a small business owner or operator, you will learn about the importance of product liability insurance, which protects you from financial ruin in the event that you are sued for damages related to a product you’ve sold. You will learn the different types of coverage that product liability insurance provides, such as personal injury, property damage, and even advertising injuries.
You will also understand the difference between moral hazard, a concept that refers to increased likelihood of taking risks when insured, and contributory negligence, a legal doctrine that bar an injured party from recovering damages if they contributed to their own injury. This article will give you an overview on how product liability insurance works and how it can protect your business.
As a business owner, you know that being sued is a very real possibility. After all, no matter how well you design and manufacture your products, there’s always the chance that something could go wrong. That’s where product liability insurance comes in.
According to a study by the Product Liability Alliance, a trade association, the average product liability award in the United States was around $3 million in 2018, which has been relatively steady since the 1990s, although there have been much larger awards in some cases. This fact can stress the importance of having a product liability insurance policy for business owners as even a single lawsuit with a large award could financially ruin the business.
This type of insurance protects you from financial ruin in the event that you are sued for damages related to a product you’ve sold.
But what exactly is product liability insurance? How does it work? And what is the difference between moral hazard and contributory negligence? Keep reading to find out.
What is Product Liability Insurance?
Product liability insurance is a type of insurance that provides protection in the event that you are sued for damages related to a product you’ve sold. This protection can extend to cover things like personal injury, property damage, and even advertising injuries.
How Does Product Liability Insurance Work?
If you are sued for damages related to a product you’ve sold, your product liability insurance policy will help pay for your legal expenses. In some cases, the policy may even help pay for any damages awarded to the plaintiff. It’s important to note, however, that product liability insurance does not protect against every possible lawsuit. For example, if you are sued for breach of contract or fraud, your policy will not provide any coverage.
What is the Difference Between Moral Hazard and Contributory Negligence?
Moral hazard is the increased likelihood of someone taking risks when they are insured against the consequences of those risks. For example, someone with health insurance may be more likely to eat unhealthy foods or partake in risky activities because they know that their medical expenses will be covered by their insurance policy.
Contributory negligence is a legal doctrine that bars an injured party from recovering damages if they contributed to their own injury. For example, if someone is hit by a car while crossing the street outside of a crosswalk, they may be barred from recovering damages because their own negligence contributed to their injury.
Product liability insurance is an important type of coverage for any business owner to have. It can help protect you from financial ruin in the event that you are sued for damages related to a product you’ve sold. But it’s important to understand how this type of insurance works and what exclusions may apply. Additionally, it’s important to be aware of the concepts of moral hazard and contributory negligence as they may impact your ability to recover damages in a lawsuit.