What are the consequences of not having Product Liability Business Insurance?

Question

It seems impossible to get relevant and specific business insurance for the things that really matter - particularly product liability. I have an internet business selling a very wide variety of products/gifts online. My business evidenly does not conform to the criteria that insurers feel are a "nice safe money making bet" for themselves. I work from home until the business is bigger, it sells more than one type of product (not just gadgets/electrical items or clothing etc). A lot of the products are handmade or exlusive. I sell to NAmerica as well as Europe and UK. All of this means I can't get proper prod liablty insrnce cover. So if I can't get insurance, what happens it I continue without it? I have tried so hard over the past year and it just seems impossible, I am not prepared to totally change the business to suite some insurance company, or spend thousands buying a useless policy that covers irrelevant bits when product liability isn't being covered. What can I do?

Possibility of being sued for everything ++++

Answer 1

Get Insured or become a Limited Liability company otherwise you risk losing absolutely everything!

The risk of lack of PL insurance is the same as with any other ... you have to pay a claim out of your own pocket. At least Ltd status would let you personally survive.

Answer 2

Here's the problem: handmade goods. No insurance company in the world is going to want to insure your product liability unless you have a safe Quality Assurance company like Six Sigma. All of the other products should be covered by their manufacturers. Anyway, there's no way you can afford an in-depth QA program. The reason companies have product liability insurance (and nearly 99% don't) is to cover themselves in case of that big lawsuit. A lawsuit from a different country can be avoided. If all of your sales are made online, then make the buyer agree to the terms and conditions, which should read "All grievances will be settled by arbitration within the courts of the state of Arkansas (or wherever you live). Because somebody can't serve you and force you to leave your home for arbitration, they must come to you. This filters out all of the nobodies looking for a quick buck (like that woman that found the finger in chili at Wendy's).

Next. The worst that can happen if your business is a sole proprietorship is you lose everything you own. This will only happen if your product is a hazard and you had good reason to know about it. If you set up your company as a corporation, you can only lose the assets of the corporation and then claim bankruptcy once the company is broke. Honestly, I think your safest bet is to create two separate corporations. One is an Internet business that sells merchandise. The other is a small assembling, craft, or manufacturing company that makes handmade goods. If it ever comes to a head, the craft company loses in arbitration, but your core business doesn't. You should keep any computers under the Internet company, and any tools under the craft company.

Having two companies can be a hassle. You will have to have two separate accounting ledgers, have different tax IDs, pay two separate business fees at all applicable levels. But all of these are relatively cheap compared to what you'd be paying to an insurance company if they accepted you.

Answer 3

Products Liability coverage protects you if you get sued because of Bodily Injury or Property Damage incurred due to the use of one of your products.
If you are merely a middle man and do not touch the product there is very little responsibility on your part and your insurance company will charge a low (distributor's) rate.
There is an exception to this rule. If you are importing products from other countries the insurance company will charge you a much higher (manufacturer's) rate.
The reason is: the insurance company feels they have little opportunity of recouping any losses they incur when they sue an overseas manufacturer (due to uncertainty about foreign systems of jurisprudence)
Underwriters have alot of leeway in the rates they charge for Products Liability (this is called "a" rating) and you should deal with an insurance broker who understands this.
Seperate the receipts you derive from domestically manufactured products from the receipts derived from imported products.
Get Certificates of Insurance from the manufacturers and distributors with whom you deal.
The insurance company will feel most comfortable with the products that are manufactured in this country by companies that have Products Liability Coverage as they will go after them to recoup any money they spend defending you against suits.
I hope this information saves you money
Dave

Answer 4

Well, if you don't and someone does get hurt from a product that you sell, they can sue you. If you loose, then the $$ will come out of your pocket. I hope you have your business set up as a C-corp or S-Corp. This will at least help to protect some of your personal assets from any lawsuit.

Answer 5

since you are currently out of your home. Inform your agent of the business and he can place a rider to your policy to cover lost product as well as liability.

When you more to a storefront then there are several types of policies to cover the issues you wish to address.

Answer 6

Public felony duty coverage isn't a felony requirement - so it really is completely as a lot as you no matter if you're taking it out or no longer. taking under consideration the actual undeniable truth that lower than present day litigation regulations human beings can declare thousands of kilos for the slightest inconvenience, i'd recommend that you're taking out a coverage. It merely isn't mega-intense priced and grant you with peace of thoughts.