Services You Can Use: Liability Insurance

Do you find the subject of liability insurance to be:

(a) Scary

(b) Boring

(c) Not applicable to you

(D) All of the above

Whatever the reason, we are fooling ourselves if we feel we feel we can ignore it. Simply put, most retailers of any size will require a manufacturer or importer (I will be referring to both in this blog when I use the term "manufacturer") to have product liability insurance and if they don’t have it, the retailer will not do business with them. Furthermore, some retailers even specify the amount of coverage a specific a manufacturer must obtain. 

Why?  Because the retailer expects the manufacturer’s insurance to cover them as well should something bad go wrong.  

It is for this reason that I decided to interview Benjamin Thrush, Vice President for New Business Development at HUB International Northeast, Inc. Hub has the endorsement of the   TIA and therefore specializes in toy companies. Here is my interview with Ben:

Richard:

What is product liability insurance?

Ben:

Product Liability insurance responds to third party allegations (for example those of a consumer) of “Bodily Injury” or “Property Damage” against the “Named Insured (the company, in this case a toy manufacturer, covered and therefore protected by the policy).”  Product Liability policies will not only pay for the cost of defending such claims, but also for any damages awarded against the Named Insured up to the policy limit.

Richard:

What happens if a company chooses not to purchase product liability coverage?

Ben:

If a manufacturer were not to purchase product liabilitycoverage, they would be self-insuring against all potential legal expenses and damages associated with third party allegations. In other words, if they get sued, they pay out of their own pocket.

In addition, most retailers will not execute purchase orders without first receiving evidence the manufacturer has secured a product liability policy.  Simply put, a product liability policy will not only pay for the legal fees in connection with defending the manufacturer and its retail customer in such a suit, but will also provide coverage for any verdict awarded against them up to the policy limit.

Richard:

Your company, HUB International, is an insurance broker. What exactly do you do?

Ben:

HUB International is the fourth largest privately held insurance broker in North America.  As an independent insurance broker employed by HUB International, I have the capability to negotiate terms and pricing with multiple insurance companies in the effort of obtaining the most comprehensive and competitive product liability coverage available.

Richard:

Product liability insurance can be expensive for some companies? Are there ways for a company to reduce its premium?

Ben:

One way to help companies reduce product liability insurance cost is for the manufacturer to fully understand their agreement to indemnify (hold harmless) their retail customer.   For example, some indemnification agreements require the manufacturer to pay for the retailer’s defense costs in the case of a lawsuit.  This practice can adversely affect the manufacturer’s own loss history and thereby increase its future product liability insurance premiums for up to five years.

Richard:

Should the manufacturer get more than one quote?

Ben:

Companies have the right to request multiple quotes from multiple insurance brokers. It is important for the manufacturer to select an insurance broker who has experience in the toy industry and who has the relationships with insurance underwriters who understand the manufacturer’s exposure and have products that will properly address that exposure. 

Richard:

Are there many insurance companies that specialize in the toy industry?

Ben:

There are a limited number of insurance companies who provide product liability coverage for toy industry manufacturers, so it is in the manufacturer’s best interest to work with an insurance broker who has this specialty.

Richard:

If our readers want to find an insurance broker other than Hub, where can they go?

Ben:

To find an insurance broker nearest you that can help find a product liability policy for your company, search the website www.iiaba.net.

Richard:

Thank you, Ben!