How Purchasing Foreign Liability Insurance May Reduce Your Product Liability Insurance Cost

Many of the U.S. manufactures and distributors that contact me looking for a product liability insurance quote and export products to countries outside the U.S. are often unaware there is often a large difference between U.S. product liability insurance rates and foreign product liability rates.  In many cases U.S. exporters are not always aware that another option exist because local and general agents are not aware of all the options when it comes to product liability.

While it is, in most cases, safe to assume that your insurance policy will cover you in the event you have a foreign product liability lawsuit, it is important to understand that most of the U.S. product liability insurance policies will only cover foreign product liability claims that are brought back into the U.S. courts. 

The problem with allowing foreign product liability claims to be heard in the U.S. courts is it is usually much more expensive than the alternative of having the claim heard in the country of origin.   The first reason for this is contingency fees. In the U.S., lawsuits can be brought with little or no expense to the litigant and therefore, there is no cost to the litigant and no reason not to “roll the dice”.  The result is often frivolous and marginal lawsuits in the hopes of “hitting the jackpot”.  Contingency fees are simply a percentage of settlement or judgment awards so the litigant pays nothing if nothing is won or recovered by the litigant’s attorneys. The second reason is the liberal discovery rules in the U.S.  It has become an art for U.S. law firms to cover-up defendants with discovery materials. The cost for a defendant to comply is enormous. Even when it is obvious that the defendant has no negligence or role in the lawsuit, the defendants’ insurance carriers are often willing to pay thousands of dollars to get their names released from a lawsuit because it cheaper to settle than respond to all the discovery materials. The third reason is punitive damages.  Punitive damages allows the jury to reward further damages on top of compensatory damages.  If a plaintiff can show the defendants behavior was egregious and callous, punitive damages may be awarded.  While in many cases proving gross negligence can be a daunting task, foreign product liability litigants may have the luxury of venue shopping to find more favorable forums or courts in the U.S. to have their cases heard and therefore, increase the chances of finding a more sympathetic jury pool and receiving punitive damage awards.

In summary, for many U.S. exporters of products that are considered very high risk such as chemicals and critical aircraft and auto parts, foreign liability insurance will likely not be available. For all other U.S exporters, when the foreign liability insurance coverage is available it should save you considerable money by have purchasing this insurance and excluding Worldwide coverage on their U.S. product liability insurance policy.