Action Steps to Reduce Product Liability Risk

In the USA, manufacturers, suppliers and retailers can be held responsible for injuries caused by the products they make or distribute. Liability can result from defects in design or manufacture. In this post we identify actions you can take to reduce your product liability risk.

Insurance. Step one is to obtain product liability coverage with high enough limits. Your insurance agent can help you select the right policy. Insurance will also pay for your legal defense if you are sued for a covered claim.

Indemnification Clauses. If you make components that go into your customer’s products, your Terms and Conditions or a separate agreement can require your customer to indemnify you for product liability claims. This is especially important if you are making the component according to their design or specifications.

Liability Limits. Your terms with your customer can include language stating that you are not liable for indirect or consequential damages such as their lost profits if there is a problem.

Quality Systems. Of course the best protection is to avoid a problem in the first place. Implement the best quality systems and testing protocols to reduce or eliminate manufacturing defects.

Keep Good Records. Keep good records of your customer’s design specifications and change orders. Document your quality control and testing procedures. If someone makes a claim based on defective design, you want to be able to show it was someone else’s design (if that is the case).

Response Plan. Have a good response plan ready about what to do and who to contact if there is a product liability claim.

Your insurance agent and attorney can help you reduce your risk.

Harvey Koning, Varnum Law at www.varnumlaw.com