Product Liability Primer for Start-up Businesses

product recall insurance

What to do in the event of a product recall

So, you’ve either got your business up and running or you’re in the planning stages. A lot goes into running a business and keeping it running smoothly. Have you thought about how a product liability issue could affect your operations and even your ability to stay afloat?

No matter whether you’re the manufacturer, distributor or retailer in the product sales chain, you’re susceptible to being affected by a product recall and a product liability lawsuit. And even the biggest and healthiest of businesses can go bankrupt trying to recover from such events. Are you prepared? Being prepared means being proactive, not reacting after the fact.

Lowering your risk of a recall or lawsuit

  • Does the product work the way intended and, if necessary, are there warning labels included on the product packaging and instructions? Lack of attention to these two basics leaves you wide open to litigation in the event an injury results from use of your product.
  • The potential for litigation risks can be identified with a risk audit or litigation risk assessment. Researching such risks offers you the ability to circumvent them as much as possible. Of course, this doesn’t mean the product won’t ever be subjected to a recall.
  • A plan for reducing and/or eliminating risks can be developed once the scope and nature of potential risks are identified. This, of course, is best done before a product goes to market.
  • Create a quality control strategy. Everyone in the chain of your product’s commerce is vulnerable to litigation, so it’s critical the establish strict quality control procedures.

Yes, these steps will take time and considerable effort, but that’s preferable in the long run to the potential financial costs and damage to your reputation if you allow a faulty product that could cause harm to reach the consumer. However, it’s important to know that there is no assurance you won’t face litigation once you’ve made an assessment and set controls in place.

If you’re sued…

Product liability cases are complex, so contact a product liability attorney immediately.

He or she will advise you on the best course of action to take and help you navigate the process.  To do so, you will need to provide your attorney with all the documentation that will support your case, i.e. safety test results and  proof of quality control. Inform your attorney whether you have product liability insurance and be prepared to call your agent.

Source: Lucinda Watrous, “Watch Yourself: Is Your Business Prepared for Product Liability Issue.” 29 March, 2016.

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