If you run a business supplying products to customers, you should take out Product Liability insurance in Santa Maria.
This is because you are running the risk of being sued if customers complain that the product was in some way faulty or defective, or if you misrepresented its function.
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Product liability insurance covers your business selling or supplying any product in Santa Maria if a customer makes a claim for damages, misrepresentation or negligence and sues you for losses, damages, or injuries.
Understanding product liability as a business in Santa Maria, CA
Courts in Santa Maria have to decide whether a claim for damages can be treated as having been caused by a defect in the product itself, or because of negligence on the part of either the supplier or the user.
In the case of defects, the supplier can use product liability insurance to cover the costs. In the case of negligence by the supplier, it can only be covered by Professional Liability insurance.
Obviously, if it is caused by negligence on the part of the user or customer, then there is no basis for the claim.
Claims of defects generally fall into three groups:
- Defective design
- Defective manufacture
- Defective instructions and warnings concerning the proper use of the product
- Breach of warranty.
Suppose a product your business in Santa Maria manufactures or supplies has some form of defective design and causes damage to many customers.
In that case, you could be sued for the resultant damages.
Example: Some battery-powered electric vehicles have burst into flames. Experts say this is due to questions about the safety and durability of aging batteries. The National Highway Traffic Safety Administration (NHTSA) has contacted manufacturers over the matter.
Example: In 2022, a major Japanese car maker issued a recall notice on some models of its leading vehicles. A defect had been found in the Engine Control Unit that could cause a sudden drive power loss, increasing the risk of a crash.
If either of these instances, if design defect had been determined to have been the cause of damages in Santa Maria, the manufacturer’s Product Liability insurance, would cover the claim and all of the resultant losses, including medical bills, rehabilitation, damages as well as all legal costs.
An important legal principle applies right through the chain of supply from designer to customer. Defective design stretches back to the original designer.
So suppose you were operating a business as a supplier of autos in Santa Maria, and had sold one of the above instances of vehicles with known defective design.
In such a case, if there was a court case, the liability for the claim would extend back to the designer, and it would not need to be covered by your policy.
A manufacturer is liable when a mistake in the production process results in a single defective product, or in some cases a small batch of identical products. (This has nothing to do with design defects.)
The manufacturer can be held liable even in the absence of negligence.
Examples of a manufacturing defect include:
- A climbing wall with a cracked chain
- A batch of medications containing a poisonous substance or unexpected ingredient
- An auto with missing brake pads.
To prove a claim, the injured party must prove that the manufacturing defect directly caused the injury.
So, if two men are climbing a wall at the same time, and simultaneously place a foot on the same step, the breakage could have been caused by excess weight.
In such a case there can only be a claim if you failed to warn of the tolerance limits of the steps (see more about this below).
Breach of Warranty
Suppose your documentation or advertising claims explicitly, or guarantees, that a product will behave in a specified manner.
If it fails to do so, your business in Santa Maria will be held liable for any consequential injuries if it fails to meet those claims, even if there is no actual defect or fault.
A promise made by your business in Santa Maria to induce the sale of a product is an express warranty. Suppose, for example, that a washing machine appliance comes with a three-year warranty from the manufacturer.
In that case, the manufacturer guarantees that it will work properly for that period. If it stops working sooner, the customer can claim for breach of express warranty against the manufacturer.
However, suppose as an incentive to make the sale, you implied a more extended warranty period (say, for example, five years). In that case, any breakdown within that extended period is a breach of express warranty against your business.
Furthermore, every product is sold with an implied warranty that it works appropriately for its intended purpose. For example, a dishwasher that leaks water or doesn’t clean thoroughly could be a breach of warranty claim against the manufacturer.
A claim can be made that you failed to provide proper warnings or instructions about a product’s proper use. That may lead to a claim against your business in Santa Maria.
Defective instructions claims normally involve products that are dangerous in a way that requires the user to exercise special care, or is not immediately obvious when using it.
- Medication that doesn’t include a complete list of ingredients, in case one of them may be a trigger for a severe allergic reaction
- Chemical cleaners or solvents sold without instructions on storage
- An electrical device that must be stored away from water and humidity when out of use for prolonged periods
In any injury claim, you must be able to prove that the product was supplied with the proper instruction. Otherwise, your business can be held liable for any resulting injuries.
What does product liability insurance cover for businesses in Santa Maria, CA?
If your business supplies parts or accessories to customers, whether it’s something that was needed in the work you have been engaged to do, or as an additional sale, you should have product liability insurance to cover your risks.
For example, businesses like Handymen, Solar panel contractors, Roofing repairs, Fence Installation, General Contractors, Plumbers, Painters, Electricians, Glaziers, Carpenters, Groundskeepers and Landscapers, Concrete Contractors, Locksmiths, Field Service Technicians, Cabinet Makers, Sauna Installers and Engine Repair Shops may all need to replace defective components and parts when performing their work. All of these replaced parts carry product liability and you should have insurance to cover the possible claims.
Other businesses that are engaged in direct sales to customers, like Wedding Photographers, Tennis Coaches, Wedding Planning, Retail Stores, Party Equipment Rental, Home Staging, Esthetician, Teeth Whitening, Bookstores, Skate Shops, Personal Chefs, Flower Shops, Bakeries, Perfume Store, Bike Shops, Bike Rental Shops, Wedding and Event Venue, Drone Photography carry product liability risks.
When you are offering, advertising or suggesting a product for sale, it is implied that the product is suitable for use and is ‘safe for purpose’.
This is the case even when your business did not manufacture the product. You can be the one that a court holds liable for resulting losses or injuries caused by the product you sold.
A product liability insurance policy can help to protect your business even if it is found not to be at fault. You should remember that a claim can be lodged even if the plaintiff has no reasonable expectation of winning.
It is a civil matter, and the burden of proof is not the same as in criminal law, with the requirement to prove guilt “beyond reasonable doubt.” Courts do not usually reject claims based on sufficient evidence, but prefer to let juries decide.
So, in the case of any claim, the cost of your defense can significantly impact your business’s finances even if you don’t lose the case, or the claim is withdrawn.
However, with proper insurance coverage, not only are any damages awarded against your company in Santa Maria covered, but also the insurance company pays all associated legal costs and court fees under your product liability insurance policy.
What’s more, the insurance company is obliged to mount the defense on its own behalf, regardless of the merits of the case. Win, lose or draw, you have them covering you.
Remember, it is far better to have product liability insurance that you didn’t ever need than to need product liability insurance and you don’t have it.
How much will Product Liability Insurance cost a small business in Santa Maria, CA?
Costs are primarily dependent on the size of your business. Still, they can also be affected by your claims history, your location inside Santa Maria, the general type of business, and most notably on the level of exposure.
Premiums are calculated per $100 of annual sales revenue. For most small businesses in Santa Maria, the rates start in the range of 15¢ – 20¢ per hundred dollars
Still, they can go as high as $1.50 in high-risk areas or types of activity, especially where there is potential that bodily injury or property damage could result from defects inherent in the products.
What are the other main kinds of insurance that businesses in Santa Maria, CA take out?
Most businesses in Santa Maria cover their risks by taking out the most important insurance covers. These are usually:
To cover any claims that business activity in Santa Maria caused some damage or injury to a third party (known as General Liability insurance). In case of claims that your work was either not properly done or failed to satisfy the promises you made when taking on the work, businesses need Professional Liability insurance (also known as Errors & Omissions insurance)
Some insurance companies in Santa Maria offer a Business Owners Policy (BOP) that combines general liability and most asset insurance covers into one policy that is generally cheaper than the individual covers.
To meet the requirements of owning and running a business in Santa Maria, such as Workers Compensation insurance, Business Income insurance, Data Breach Insurance, Business Interruption insurance, Cyber Liability insurance, and Directors and officers Insurance
What is the Santa Maria, CA “Consumer Expectation Test”?
This test asks whether an “ordinary consumer” could anticipate that a product he bought poses a risk of higher danger than he could expect. An ordinary consumer in Santa Maria, CA is not likely to have specialist knowledge of how a product works or to be able to understand scientific or special instruction.
For example, a warning label in English on a product bought in the US that was simply a translation of a foreign language can be considered having a defective warning if purchasers do not understand the warning, no matter how good the original was.
Does a seller in Santa Maria, CA on Amazon need Product Liability insurance?
Product liability insurance for Amazon sellers based in Santa Maria, CA is just as necessary as for any other business. Amazon is not the product supplier – your business is the supplier, and must therefore be protected by insurance.
What is the most common cause of product liability claims in Santa Maria, CA?
A manufacturing defect claim is the most common cause of product liability claims in Santa Maria. It alleges that the original design of the product was safe, but something unexpected happened during the manufacturing process, making the product unsafe.
What are the three types of claims based on product liability in Santa Maria, CA?
Claims in Santa Maria, CA usually fall into the categories of product liability, defective manufacture or failure to provide adequate warnings on the proper use of a product.
It is essential to know that under current product liability insurance case law, simply printing a “product liability disclaimer” or “product liability exclusion” on a product does not protect your business from claims. The liability is part of the risk of doing business and cannot be waived unless the customer explicitly agrees.
What is an example of product liability in Santa Maria, CA?
Since the early 1980s, defective design claims have formed the overwhelming majority of product liability cases in Santa Maria, CA. Wikipedia states, “Design defects occur where the product design is inherently dangerous or useless (and hence defective) no matter how carefully manufactured.
In other words, the defective product is the same as every other one on the same assembly line because it is exactly what the manufacturer designed and intended to build, but the plaintiff is contending that the design itself is defective.”