Nearly every manufacturing company will experience a product liability claim at some point – and, whether you’re found to be at-fault or not, the process of investigating the claim and mounting a defense can be financially devastating. However, with proper planning and reliable product liability insurance, you’ll be better equipped to respond, react, and recover.
Here are five proactive strategies to help minimize risk exposures and protect your customers, supply chain, and bottom line.
1. Consider Risk Transfer Programs
With most products, various suppliers contribute to the manufacturing process, which means your company may not be able to control the quality of every material and/or component. So, it’s important to reduce your chances of being held liable for another supplier’s negligence. Here are three strategies to consider:
- Hold Harmless Agreements – to define the liability of manufacturers, contractors, and suppliers, so that each party remains responsible for their own negligence and/or errors and omissions.
- Certificate of Insurance Requirements – to confirm that all parties have the appropriate coverage to mount a defense in the event of a claim.
- Best Practices for Imported Goods – to help ensure due diligence is conducted for any imported products, components, or raw materials because it’s unlikely that you’ll be able to transfer liability in these cases.
2. Implement Systems for Tracking Essential Records
Whether you offer consumer, commercial, or industrial products, all manufacturers should have strict documentation policies that meet (and exceed) applicable regulatory requirements and industry best practices. This includes systems for tracking customer requests, design and engineering changes, and quality control benchmarks. Some of the documents that should be easily accessible include:
- Customer design specifications, product orders, and client approvals
- Change orders and well-documented reasons for change requests
- Engineering drawings and manufacturing blueprints
- Written procedures for manufacturing processes and quality control steps
- Confirmation of quality and conformity at all quality control checkpoints
- Risk transfer contracts and agreements
- Supplier and vendor contracts
These documents will play an integral role if an investigation and/or defense are necessary.
3. Create a Crisis Response Plan
A proactive crisis response plan ensures your organization is able to act the moment you discover a problem. Operational personnel will play an essential role in documenting key evidence (if the loss scene is still available) and supporting the investigation. Your top executives will be able to focus on implementing the crisis communications plan – managing your brand reputation, guiding (or at least contributing to) the public conversation, and responding to affected parties and important stakeholders.
As you develop your crisis response plan, talk with your commercial insurance carrier about the resources and support they will be able to offer when you’re faced with accusations of injuries or damages arising from the use of your product.
4. Monitor Customer Feedback
The best way to prepare for a product liability claim is to prevent one altogether. Establishing a process for gathering and monitoring customer feedback can give you access to an invaluable ‘early warning system’ – so to speak. After all, it’s better to investigate a customer’s complaint about an overheating component than to have to investigate a fire that resulted from the unresolved issue.
5. Get Reliable Product Liability Insurance Coverage
Product liability insurance protects your business by providing the financial support and resources you would need to navigate the fallout if your product or service caused injury, illness, or damage.
At Swarts, Manning & Associates, we work across a broad range of industries to help manage and protect against the risks associated with bringing a product or service to market. We provide a unique perspective on all of your commercial coverage options, and we help to determine which carrier best fits your business needs. We strive to find you the broadest coverage at the best available rate. Give us a call to get started: (833) 878-2820.
Each week, Swarts, Manning & Associates covers relevant topics for your business. Stay tuned to hear more discussions about managing your insurance and industry-specific tips.
