Product Liability Insurance

Product Liability Insurance for Ontario Manufacturers, Suppliers and Distributors and Retailers

Whether you run a massive fabrication plant, a small online retail shop or something in between, you are involved in the supply chain that creates products and ultimately delivers them to the consumer. You may work with a huge range of potential products, from food or cosmetics to toys or electronics and beyond—but regardless of the type of products, your work exposes you to some unique liability risks.

You're not just responsible for what happens with your product while it's actually in your hands. Once it has been passed on to the next party in the distribution chain or the consumer, you are still liable for any harm it causes due to a product defect. That liability has the potential to put your business at risk. The solution is to invest in the right product liability insurance. Ontario manufacturers, fabricators, suppliers, distributors and retailers can transfer product liability risk by speaking with the experienced brokers at Morison Insurance, who can help them get the product liability insurance necessary to avoid significant financial losses.

What is Product Liability Insurance?

Product liability insurance coverage is a type of commercial business insurance for members of the product supply chain. It offers assistance with legal expenses such as court fees, attorney fees, legal mediation, and settlement costs should the policyholder have a lawsuit brought against them because their product allegedly caused third-party property damage or third-party bodily injury due to design flaws, manufacturing defects or marketing errors such as incorrect labelling.  

Who Should Have Product Liability Insurance?

Product liability insurance in Ontario is a critically important type of commercial insurance coverage for any individual or business entity involved in manufacturing, distributing or selling a product or products, including consumables such as food, beverages and beauty or health products. From a small coffee shop that bakes its own muffins to a massive fabrication plant that produces electronic components, all businesses that occupy a spot in the supply chain should have product liability insurance to protect them against paying out of pocket for litigation expenses if they are sued because the product caused third-party property damage or bodily injury.

Why is Product Liability Insurance Necessary?

You may think that product liability insurance isn't necessary for your business because you have the experience and conscientious attention to detail to avoid anything going wrong with your product, but that's not a realistic stance. The truth is, there's always room for errors, mistakes and oversights that can have serious consequences. The reason why it's so important to have this type of coverage is that there are always opportunities for something to go wrong at some point in the design, manufacturing and distribution processes that could lead to claims of injuries or damage caused by the product—and the costs of defending yourself in court against those types of allegations can be astronomical.

Most businesses and business owners don't have room in their budgets to handle legal and settlement costs exceeding a million dollars and continue to climb from there. Settlements for product defect claims can be very high since, unlike typical liability claims for injury or damage, there's the potential for many people to be affected by the defective products. Product liability insurance in Ontario is the best way to give yourself the peace of mind that comes with knowing you won't have to pay out of pocket for the litigation and settlement costs associated with a product liability situation.

It's also important to remember that your product doesn't have to be defective for a third party to bring legal action against you. You could be sued because your product allegedly caused damage or injury and found to be not liable for product flaws in court, but you still have to pay the costs associated with your legal defence. With product liability insurance, Ontario business owners can expect to receive insurance compensation for legal expenses up to the coverage limits on the policy, whether or not they are ultimately found to be liable.

Is It Legally Mandatory to Have Product Liability Insurance in Ontario?

No, it's not—most types of commercial insurance are not legally mandatory in Canada, and product liability insurance is no exception. However, just because the government does not legally require it, that doesn't mean other parties won't require you to have it before they agree to work with you. It's expected—and a good idea—for suppliers, distributors, retailers and others to request to see a certificate of insurance that lists product liability insurance with an adequate coverage limit because they need to know that you will be able to handle the costs of litigation and settlements if a defective product is issued.

If you don't have the insurance coverage they are looking for, they may decline to work with you, which means you will be forced to pass on lucrative contracts that would enhance the success of your business.

Is Product Liability Insurance the Same as Commercial General Liability?

This is a common misconception, and it makes sense that they get confused with each other, but product liability insurance and commercial general liability insurance (CGL)are different. A CGL policy covers the cost of litigation and settlement for third-party bodily injury and third-party property damages that are allegedly caused by you or your employee but not by your product. For example, if a customer visited your commercial location and injured themself when they slipped on an ice-covered walkway that hadn't been salted, they could choose to sue you for causing bodily injury. The resulting expenses would be covered by your commercial general liability insurance, up to the coverage limits on your policy.

Product liability insurance is a specific type of commercial liability insurance that applies to the legal costs of third-party bodily injury and third-party property damage situations that are allegedly caused by your product. For example, if you manufactured a food product that became contaminated by an allergen and a number of consumers were seriously sickened when they ate it, they could bring legal action against you to recoup costs such as medical expenses and more, and the costs of your legal defence and settlements would be covered by your product liability insurance in Ontario, up to your policy's coverage limits.

Are Services Covered By Product Liability Insurance?

Liability for services you provide can be covered by insurance but not by product liability insurance. Product liability coverage exists specifically to address the costs of litigation that result from claims that a product caused third-party property damage or bodily injury, which means it does not apply to the legal costs that result from damage or injury caused by services you provide.

How Much Does Product Liability Insurance Cost?

There is a wide range of factors that go into calculating the cost of product liability insurance premiums, so it's impossible to say how much it might cost you in particular before we know a lot more about your business. Here are a few of the factors that are considered when coming up with a cost for product liability insurance in Ontario:

• The business type
• The type of product or products
• Your position in the distribution chain
• Your volume of sales and annual revenue
• The necessary coverage limits
• Your insurance claims history
• Safety measures and checks
• Your business location

These are just some of the many considerations to keep in mind. When you contact the reliable brokers at Morison Insurance, we'll start by consulting with you to find out as much information as possible about your unique business so we can track down the right product liability insurance coverages and limits for your circumstances and insurance needs, along with other types of business insurance you may need.

When Would I Need Product Liability Insurance?

It can sometimes be easier to understand exactly what insurance coverage does by hearing about some examples of potential product liability incidents. Here are a couple of examples of situations that could lead you to file a claim on your product liability insurance in Ontario:

• You manufacture clothing for infants and small children, and one of the items you produce includes a choking hazard that causes injury to a baby. The baby's parents sue you for causing bodily harm to their child, and you file a product liability claim to receive insurance compensation to handle the cost of defending yourself in court and covering the expense of the settlement once you are found liable.
• Your business manufactures food products, and on the label of one of your products, you fail to include sufficient warning of an ingredient that could cause allergic reactions. Several people suffer allergic reactions and file a joint lawsuit against you for bodily injury. Your product liability claim results in financial assistance to handle the expenses of litigation and settlement.

Where Can I Get the Right Product Liability Insurance in Ontario?

When you're ready to learn more about this type of coverage or get started on some product liability insurance quotes, just pick up the phone and dial 1-800-463-8074 to speak with the business insurance experts at Morison Insurance. Our team of qualified insurance brokers works for you rather than for the insurance companies, which means you can rely on us to keep your best interests in mind. We'll take care to seek out the coverages you need. You can rest assured that you are insured against major financial setbacks should you have legal action brought against you because your product or products allegedly caused third-party bodily injury or third-party property damage.

This content is written by our Morison Insurance team. It is provided for general information only. Insurance needs differ from person to person, and this article is therefore not a substitute for professional advice about your individual insurance needs which can be obtained by speaking to one of our brokers.