How to Reduce Product Liability Risks

Product Liability claims and Product Liability litigation against your business are no joke. In fact, they may severely impact your small business and damage the upstanding reputation you have worked so hard to create around it. Product Liability claims may even potentially push your business beyond the point of no return, which is why Product Liability risk management is a popular choice for many business owners.

Defects and liability risks can negatively impact product manufacturers, designers, distributors, wholesalers, as well as retailers. Physical or digital items that omit adequate warnings, injure a third party, or cause a wrongful death can lead to lawsuits for any party involved in the product.

Given the potential consequences of a Product Liability claim against your business, it can be worth learning more about Product Liability risks, and how Product Liability risk management can help reduce the impact that a Product Liability claim may have on your business.

Whether your business manufactures and sells its own products, or sells products manufactured by others, as the business owner you are responsible for ensuring that:

  • those products are safe;
  • they comply with Australian standards; and
  • that they meet the statutory requirements set out under Australian Consumer Law (ACL).

And this is where Product Liability insurance can help. Product Liability insurance provides financial protection if a Product Liability litigation case is bought against your business. This financial protection can help cover the costs of your legal defence while also covering any damages awarded to consumers that you would have to otherwise pay out of your own pocket.

Three types of product defects that may lead to a Product Liability claim

1. Design defects

Defects related to flaws in how a product has been designed. An example is a cake shop that has non-edible decorations on its cakes. The owner of the bakery may be exposed to a Product Liability claim if someone should choke on a non-edible decoration.

2. Manufacturing defects

Defects related to how a product is produced. For example, when a manufacturer doesn’t follow the recommended product design plans or makes errors when assembling products.

3. Marketing defects

These are defects related to how a product is marketed to consumers. Examples include improper labeling that doesn’t warn consumers about the potential dangers of a product.

Three Product Liability risk management strategies to consider

The risk of a Product Liability claim and Product Liability litigation against your business is no laughing matter. However, there are several strategies for reducing your Product Liability risk, including Product Liability insurance. Consider the following three steps that may help reduce your Product Liability risk and reduce the chance of Product Liability litigation against your business.

1. Focus on design safety

Be diligent at all times when it comes to ensuring how your products are designed. Carefully consider any potential consequences that may threaten the health or safety of someone who uses your products. What safety measures can you use to test the finished product yourself? You may consider hiring third-party product testers to evaluate the level of design safety your products provide.

2. Test component parts

In all likelihood your product may use component parts manufactured by another business. If that is the case, ensure that you conduct thorough testing on these parts to ensure that they are safe to use in your own product.

3. Be honest in your marketing

Sure, there is plenty of creative licence involved in product marketing. And while it’s all well and good to position your product as the latest and greatest and a ‘must have’ for customers, it’s critically important that you remain honest when marketing your products. Doing so may help reduce the chances of your business being the subject of Product Liability litigation.

Aim for your marketing to accurately reflect what your product actually can do. The instructions or packaging is where you can clearly explain how customers can use your product safely. Any warnings of potential injury from product misuse may also be included here.

How BizCover helps business owners thrive

Reducing your Product Liability risk can be critical for your long-term business success. It enables you to focus on building your business, rather than worrying about the ifs, buts, or maybes that may linger in the back of your mind when your head hits the pillow after a long day of running your business.

BizCover helps small business owners all over Australia to reduce their exposure to Product Liability claims and prepare for those unexpected moments that can happen when running a business. We are here to help with your business insurance needs 24/7 thanks to our unique, 100 per cent online platform.

Looking for business insurance? Choose BizCover to compare competitive Product Liability insurance quotes from leading insurers online, purchase your coverage online in only 10 minutes, and keep moving forward with your business. Get started with a quote now.

This information is general only and does not take into account your objectives, financial situation or needs. It should not be relied upon as advice. As with any insurance, cover will be subject to the terms, conditions and exclusions contained in the policy wording.
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