“How much coverage do I need? I’m just a distributor”

How the products you distribute define you

“I’m just a distributor. I shouldn’t have to pay much for my insurance.”  Not so fast! You’re probably much more than a distributor. To find out, take this quiz:

  • Do you import your product?
  • Do you have your product made to your specifications?
  • Is the product your name brand product?
  • Did you create the instructions or warnings for your product?

If you answered “yes” to any of these questions, you are more than a distributor in the eyes of the law and your insurance carrier.

What the law says

Before I explain why, it’s important to understand that in most states Product Liability law is based on strict liability. With strict liability, a plaintiff only has to prove your product was defective and not that you were negligent.

The word defective in this context means the product may be manufactured or designed incorrectly or the instructions/warnings were unclear to the user.  This is very different from negligence-based laws where a plaintiff must show that your negligence caused the injury.  Negligence is very difficult to prove, whereas strict liability law is much easier to prove.

How many hats are you wearing?

If you are an importer, you are seen as the manufacturer in the U.S. This is because it is deemed too expensive and complicated to pursue claims against foreign manufacturers.  If you bring foreign products into the U.S. market, the burden of safety is on you.

When you have a product built to your specifications, then design defect claims belong to you. To avoid further expenses, you should always ask your contract manufacturer to name you as additional insured on their Product Liability policy. They also need to provide you with a certificate of insurance as evidence of this endorsement.

If you designed the product, you are probably responsible for the content of the instructions and warnings.

For any product that is your name-brand product, many state laws require that you have the name of the manufacturer clearly printed on the product label.  If it is not clear, the law considers and  treats you as the manufacturer of the product.

It’s a big country!

Another important point to remember is that product liability laws and interpretations vary greatly from state to state.

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