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Products liability insurance defends you against claims asserting damage or injury caused by your products. (DUH!) When your business output consists of a service or services, rather than an actual product, those services are referred to as "Completed Operations," and treated for insurance purposes much the same as if you produced a product. (This may NOT be the case if your activities are considered professional services, which would require the inclusion of an altogether different type of insurance.) Products Liability insurance is generally included with ordinary Commercial General Liability Insurance, but may need to be purchased separately, particularly when your product is of a high-risk or highly specialized type. Rates are typically expressed as a percentage of your actual total gross sales/receipts for the policy year, so it is important to expect an audit of your records following the policy anniversary. The premium you paid at the outset is based purely on an estimate, and if it has been seriously underdeposited, you'll owe a large additional premium. Rate levels, as you might expect, are influenced principally by the risk inherent in your particular product classification, as well as the likelihood that the 2-3% of the consuming public who are complete imbeciles will figure out a way to seriously injure themselves or others, or otherwise misuse it. Common business liability policies do not cover claims that your product simply didn't work, didn't meet purchaser expectations, or didn't do what was expected. Costs to recall defective, spoiled or sabotaged inventory are excluded as well. (But insurable as a specialty insurance product.) There have, however, been legal interpretations which created much gray. As a leading example, this coverage has been widely invoked by building contractors who were sued for defective construction and in numerous cases, courts have held that contractors' liability policies were applicable to millions of dollars in claims. As a result, many contractors' insurance carriers took their underwriting ball & went home, leaving the building trades with far fewer insurance sources, highly restrictive policies, and spiraling insurance costs as supply-demand took its toll. |