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Product liability insurance provides the necessary protection for companies involved in designing, distributing, manufacturing, and selling their products. It provides the necessary protection and coverage when a third-party has suffered due to the usage or consumption of your product.
Countless possible cases can result in a product liability claim. Poor labeling, unsafe design, inconsistent manufacturing, or misrepresentation of a product can lead to a potential lawsuit. Even if the accusations are false, the company needs sufficient coverage to pay for necessary defense costs. Even if you are sure about the quality and safety of your product, an unexpected malfunction, contamination or even misuse of a product can make you potentially responsible if a third-party files a lawsuit against your company.
A product recall of a massive company often captivates the attention of the media. In some cases, recalled products are not necessarily harmful but create significant dissatisfaction in the eyes of customers. If a product recall is requested due to a health hazard of a product, it can create multiple claims against the company, and tarnish its reputation.
A recall can be a very devastating process for any company. Additional shipping and warehousing costs, the need for product testing and investigations, as well as overtime for workers, can be very costly or financially crippling even for a bigger company.
A third party can discover a serious, potentially life-threatening issue about your product, so it would be in your best interest to always be prepared for a lawsuit coming your way. Not every case of dissatisfaction of delivered goods will require a product recall, but if a company fails to report a serious safety issue, it can result in many criminal and civil penalties.
It is wise for a company to issue a voluntary recall to avoid further distribution of a defective or potentially dangerous product. If failed to do so, the regulatory body may conduct an investigation and issue a mandatory recall.
Many businesses do not even realize that they don’t have the necessary coverage for a product recall. Product liability insurance only deals with claims against the products of the company, covering the legal defense costs and potential judgments or settlements. A product recall will have a financial toll on your company, so even if you are quite certain that your product is safe, it is much better to protect yourself with product recall insurance.
A product recall can cause serious financial damage to any business, but some complex products are more likely to be recalled than others. Vehicles, toys, medication, and cosmetics often fail to meet certain standards and need to be recalled, but even food products are vulnerable to these problems. In some cases, external factors can cause mandatory product recall. For example, dairy product companies in Lithuania have been forced to recall more than 300 tons of milk due to contamination caused by a fire in a tire recycling factory in Alytus. A need for a product recall can be unexpected, so it is better to take care of the necessary protection to minimize the damage to your company.
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