Product liability accounts for 5% of all small business claims, with the average product liability settlement costing businesses approximately $35,000, according to the Insurance Journal. Entrepreneurs in the manufacturing industry have a legal obligation to ensure their products and components are safe for consumers. Failure to do so can result in multiple lawsuits for producing defective products that might cause illnesses and bodily injuries. While product manufacturers are more likely to take responsibility for defective products, product liability cases involve product suppliers, wholesalers, retailers, repairers, and assemblers. Even if you own an e-commerce store where customers are purchasing window curtains online or other stuff, you risk being sued for product liability. Note that product liability cases can wreck your business, given settlements can cost millions of dollars. That’s why it’s crucial to mitigate risks. Below are 6 of the best safety practices for protecting your business against the risk of product liability.
Prioritize Product Testing
Most businesses, especially those responsible for manufacturing products, feel inclined to halt the testing process once a product hits the market. However, a company must adopt continued testing as it helps you detect potential defects in a product. Remember, defects in a product can occur during the design, manufacturing, and marketing stages. And failure to carry out all the required product evaluations increases the risk of being sued for the manufacturer’s negligence. Customers can also sue you for failure to recall a dangerous or faulty product. As a general rule of thumb, be sure to take the right steps to avoid selling defective goods. Always prioritize safe manufacturing processes, regular testing, and do thorough research where needed. Most importantly, keep notes about product research and test findings.
Integrate Safety During Design And Development Stages
Before you can start manufacturing products, think of how consumers will use them. This step will help you identify some of the safety risks and hazards your products will present once they’re in use. You will also be able to take the necessary preventative measures to ensure your products comply with all industry and federal standards. Note that product defects, risks, and hazards are easy to control and eliminate in the design stage. Therefore, invest time to familiarize yourself with product safety standards set by authorities in your state in advance. Understanding and complying with product safety regulations can save your company from legal implications.
Give Warning On Dangerous Products
Companies don’t have to manufacture hazard-free products, but the law requires them to reduce risks as much as possible. In most cases, this entails providing warnings on dangerous items. As a manufacturer or even material supplier, provide appropriate labeling on your products. What most people don’t realize is that labeling plays a critical role in enhancing safety. It provides users with basic knowledge of the risks involved in using a specific product. Performing a safety assessment is necessary to help you figure out how to label your products right because you’ll have accurate details of how a product will be used and who will be using it. For instance, your labels may warn against allowing children to use a particular product if there’s a risk of hazardous chemicals, temperatures, or explosion. Labeling also provides instruction on how to prevent or minimize risks. For example, you may use labels to instruct users to store a product below a specified temperature or use a specific voltage.
Invest In Product Liability Insurance
One of the best ways to protect your business against product defect cases is buying product liability insurance coverage. Whether your business entails manufacturing, designing, or selling products, you’ll need protection against legal claims. Remember, the cost of settling a product liability is too costly, especially for startups. In most cases, small businesses cannot compensate plaintiffs for injuries or property damages caused by a product. As a result, they end up in debts and cash flow problems. While product liability policies demand higher premium rates, they protect your business from financial repercussions and possible closure. Ideally, your insurance coverage compensates victims of product defects as per the amount awarded by a court.
Consult A Specialized Lawyer
Hiring a business attorney is essential for your company’s growth and success, regardless of size and industry. With a lawyer’s guidance, you can navigate daunting processes like licensing, copyright and trademark registration, zoning compliance, and lawsuits with ease. Business lawyers also provide professional advice regarding liability to ensure companies comply with set policies. Like any other branch of law, product liability terms can be challenging to understand if you lack expertise. For this reason, hire a product liability attorney you can seek advice from regarding product liability concerns and issues. A reputable lawyer will provide sound judgment to help you protect your business from lawsuits that arise because of product defects and hazards.
Review Suppliers For Potential Risks
It is not uncommon for suppliers to change the items they are supplying to wholesalers and retailers. As much as this practice seems ideal to suppliers, it can be a source of risk to your company. With this in mind, consider signing a legal agreement with your suppliers. You want to ensure your company is not liable for product hazards, defects, or risks that may be present after shipping. Therefore, ensure the contract shows that the supplier is financially responsible for any defects that may occur during the shipping process. A contract also helps you in managing your suppliers and maintaining long-term relationships.
Ensuring the products you’re manufacturing and selling both online and offline are safe for use sounds like a daunting task, but it isn’t. All you need to do is perform thorough testing during and after the production of goods. Incorporate safety in design, use warning labels, purchase product liability insurance, and hire an attorney are simple steps that will help you avoid lawsuits for selling defective products.