4 Things About Product Liability Insurance a Hardware Supplier Should Know
Industrial hardware equipment accidents happen all of the time. Some are rather insignificant and a part may just break or get damaged. However, more serious incidents can result in thousands of dollars in damage or severe injuries, and even fatalities. But who is at fault if a piece of hardware malfunctions – the manufacturer or the hardware supplier?
Hardware distributors could face hefty lawsuits if they are deemed negligent by selling equipment that is not up to code. There have been many lawsuits and court cases involving hardware suppliers. In fact, the three industries that face the most product liability claims are heavy machinery, electrical equipment, and industrial equipment suppliers. Further, the number of product liability lawsuits has increased by 300% just since 2019.
Thankfully, there is a way for hardware distributors to protect themselves from this type of legal trouble. The solution? Product liability insurance. Here’s what all industrial hardware suppliers need to know about it.
1. Product Liability Insurance Protects Suppliers Legally
All insurance policies are designed to protect the policyholder if specific circumstances occur. Product liability insurance will protect a hardware supplier should the equipment they sell cause injury or damage to the buyer.
It’s important to note that this policy does not stop a customer from filing a claim or winning their case for a defective product. If there is evidence that the hardware was defective and caused injury to damage to the buyer, the payout will come out of the insurance policy. This protects the business from having to fork over hefty payouts themselves.
Of course, there are limitations to product coverage. Most product liability insurance policies include coverage for damages that are a result of design flaws, product defects, or inadequate warnings from the manufacturer. However, the policy may not provide coverage under all situations.
2. Product Liability Insurance is not the same as a Product Warranty
Industrial hardware suppliers need to understand that this type of insurance is not the same as a product warranty. Most distributors offer a warranty or product guarantee, such as a full product replacement if a defect is found within the first year of purchase.
While warranties can protect a hardware supplier from some legal complaints, they typically do not extend to severe damages or injuries.
For instance, say that a customer purchases a wire rope. However, during the installation process, a wire strand snaps and scratches the installer’s hand, which requires stitches. The product’s warranty would provide the customer with a full wire rope replacement. However, the supplier could be held responsible for the medical costs – in which case, they would use their product liability insurance coverage.
Having a solid warranty and product guarantee is just a starting point for protecting your business. But to ensure that you are completely legally protected, you will need additional insurance.
3. Product Liability Insurance is an Affordable Investment
Nearly all businesses have some form of liability insurance in place. While it is not required by law, it is highly encouraged. Product liability may be an add-on to a general liability insurance coverage or a standalone policy.
Hardware suppliers should really view this as an investment rather than a necessary operational cost. As with all insurance policies, you don’t think about it much until it comes in handy – or you wish you had better coverage. For companies in a higher liability risk category (like industrial hardware), the more coverage you purchase, the better off you will be if worse comes to worst.
So how much should you pay for product liability insurance? Well, there is no clear-cut answer of course. Most insurance companies suggest coverage that is equivalent to about 25% of the business’s annual revenue. If this sounds like a hefty cost remember that buying insurance is going to be far less expensive than even a single payout in a major lawsuit.
4. Be Sure to Read Your Policy Before Signing
Not all product liability insurance policies are created equal. Some will offer coverage under a wider umbrella of circumstances than others – so you’ll want to read the policy closely before signing.
Note that the cost and coverage of your policy’s premium are determined by various factors about your business. Some of these factors include:
- Products sold
- Average sales and revenue
- Position in the supply chain (manufacturer, distributor, etc.)
- Coverage limits
- Claim history
You should also pay close attention to situations that will not be covered by your policy. Most product liability insurance policies do not extend to your business, only to customers. So, say that one of your employees is injured by defective equipment on company property. This would fall under your workers’ compensation policy, not product liability.
Over to You
There are many risks that come along with industrial hardware – so you need to make sure that you are buying from a supplier that guarantees product quality and integrity. Elite Sales has proudly supplied premium industrial hardware equipment for decades. We guarantee that our equipment meets the highest standards, with up to $20 million in product liability insurance coverage to back it up.
To learn more about our top-quality products, send us a message online.