The impact of imported products on your product liability exposure

The manufacturing industry has a unique set of insurance needs beyond those of the typical business, whether it’s investment capital to purchase machinery or lease warehouse space, a transportation fleet to deliver materials or products, or insurance to protect against theft or damage to your property. As a manufacturer, you will also need product liability insurance to protect yourself against claims that your products caused harm to people or property.

The insurance needs of a manufacturer have become even more complex now that we live in a global economy with multi-national supply chains. What happens when you have a complex global supply chain and use products manufactured in another country? When something goes awry, who is to blame?

Now, let’s imagine that you use good ole’ widgets in your manufacturing process and you get them from a factory in Scotland. The widget could have a design defect (i.e., the design of the widget was flawed/unsafe) or there could be a flaw in the manufacturing process or production of widgets in the Scottish factory that makes the widgets unsafe. Or imagine that the Scottish factory purchases a small part from an Irish distribution center and that small part has a design flaw which makes the widget unsafe.

It can be a serious challenge for a manufacturer in America to seek damages from a foreign company as the cost of obtaining a judgment in another country may be prohibitive, or, even if you were to get a judgment, it may not be enforceable. For these reasons, the burden of a product liability claim will likely fall on you because you incorporated the small piece that was part of the widget into your manufactured product and you may have no practical means of being compensated by your supplier.

Such claims can not only be damaging to your reputation but they can put a huge dent in your bottom line. In addition to mitigating risk in your supply chain through quality assurance, you can purchase broad form product liability insurance

Fusco & Orsini can help you sort through all of your manufacturing insurance needs and create a plan that fits your business. You can schedule a call with one of our insurance agents to discuss product liability exposure or any other manufacturing insurance topic.