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Why product liability insurance is critical for companies

(BUSINESS FINANCE) The best way to protect your company, and more importantly your customers, is product liability insurance. It keeps your standards up, and lawsuits down.

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If your small business manufactures products, you need to think about product liability insurance. No matter how good your designs are, or how polished your quality assurance strategy is, there’s a chance one of your products could come to harm a customer. And if that happens, your customer could contact a personal injury attorney and bring a case against you. Personal injury cases are somewhat common, and could cost you hundreds of thousands, if not millions of dollars if you’re not protected.

Product liability insurance coverage could protect you in the event of such a case. But what exactly is it, how does it work, and how are you supposed to get it?

The Basics of Product Liability Coverage

Let’s start with a high-level overview of product liability insurance. While different carriers and different policies will afford you different types and levels of protection, most product liability coverage is designed to shield your business from the fallout of a company-produced product that causes injury or harm to third parties.

Product liability insurance typically covers the legal fees associated with any product liability lawsuit, as well as medical costs, compensatory damages, and business damages that arise from the incident.

How Products Can Fail

How does a business become liable for a harmful product?

There are four main ways consumers can be harmed:

• Design flaws. If your product is designed in some flawed way, and the consumer gets hurt because of it, they could have a case against you. For example, if you create a deep fryer product with a locking mechanism to prevent burns, but that locking mechanism is weak or easily overridden, a customer could get burned as a result of using the product.

• Manufacturing flaws. There could also be manufacturing flaws. The design itself might be practically perfect, but if a batch of products are made with an incorrect material, or aren’t made to specifications, they could still fail in a way that harms a consumer; for example, a skateboard with a loose wheel might cause someone to fall.

• Marketing flaws. Your product could also be marketed or advertised in a way that eventually leads to consumer harm. If you falsely advertise the capabilities of your product, and a consumer follows them and hurts themselves in the process, they could hypothetically sue you. The same is true if you claim there are no downsides to a product that has downsides.

• Misuse. Even if a consumer misuses your product, your company may still be held at fault. For example, if you don’t specifically warn a customer that misuse could lead to harm, and caution them against specific forms of misuse, they could ultimately bring a case against you.

As you can see, there are many ways your products could lead to a customer getting hurt—and some of them are hard to see coming. While you can implement safeguards at every stage of the process, there’s always going to be a chance that one of your products fails in some unseen, unpredictable way.

The Extent of Damages

You may wonder if you truly need product liability insurance. After all, in the unlikely event that a product fails, you may be able to cover the costs yourself. However, this is extremely risky. The costs of a single product liability case can be devastating, and if you face a class-action lawsuit, or multiple lawsuits, there may be no chance of recovery. Remember, you could be responsible not only for compensating the customer for their injury and their pain and suffering, but also for covering the legal fees of both sides.

Some cases can cost millions, or even tens of millions of dollars.

Product Liability Insurance Rates

Most product liability insurance policies require you to pay a monthly, or other type of regular premium for your coverage. These rates will vary based on a number of factors, including the size of your business, the type of product you’re manufacturing, the extent of your distribution, and how much coverage you desire. Some insurance companies may also want to conduct inspections, reviewing the design and manufacturing of your product firsthand so they have a better sense of your safety standards.

Still, product liability insurance rates are typically reasonable. Shop around for the right insurance provider, and consider bundling your product liability insurance policy with other policies to lower your rates even further.

Conclusion

If your business designs or manufacturers products, product liability insurance is a practical must. It’s easy to get a policy, and most policies are relatively inexpensive, but this safety net could save you from shelling out millions as a result of an unforeseen product flaw. No matter how safe your operations are, or how many supervisory checks you conduct, there’s always going to be a chance that someone is injured while using your product—and that’s when your policy will kick in.

Larry Alton is an independent business consultant specializing in social media trends, business, and entrepreneurship. When he's not consulting, glued to a headset, he's working on one of his many business projects. Follow him on Twitter and LinkedIn.

Business Finance

COVID-19: Governors fail renters, a 90-day rent freeze is the only option now

Independent contractors whose only sin is renting instead of owning, are facing evictions even as Governors put tiny bandaids on the situation. A 90-day freeze is the nation’s only option to avoid mass migrations or spikes in homelessness.

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2020, it seems, is the year of rebranding—even when it comes to our impromptu recession brought on by a variety of factors (but largely thanks to COVID-19). Despite the negative connotations of widespread economic disaster, some people, such as St. Louis Federal Reserve President James Bullard, are regarding this instance as “an investment in U.S. public health.”

Should we all be so optimistic? Bullard seems to think so.

To be fair, James Bullard’s “optimism” also accounts for taking a “$2.5 trillion hit” to the economy, so it’s not all sunshine and dancing unicorns (this time). However, the long-term outcome of handling this crisis correctly—a process which involves bailing out small businesses, matching wages, and contributing to rebuilding and supporting our healthcare infrastructure—will be, according to Bullard, positive.

Bullard’s optimism does come with an important message: As with pretty much anything, the simpler we can keep solutions to this problem, the better the outcome will be. We’re not off to a great start; between states’ varying responses to COVID-19 procedures and mixed congressional support for a stimulus package, the process of dealing with economic fallout has become more complicated than some—Bullard included—would consider “ideal”.

Unfortunately, there isn’t really an “ideal” outcome here that is also practical without requiring a heretofore unseen level of cooperation and cohesion between political parties and state-based cultures. In the event that we can actually pull together and actively invest, as Bullard suggests, in our infrastructure, the implications for our economy will ultimately be positive—even if only in a pyrrhic victory kind of way.

In unprecedented times of crisis—you know, like right now—a little bit of optimism doesn’t hurt. Over the course of the next few months, you’ll hear all sorts of different takes on the situation; some people—those who identify as “realists” but really just enjoy bumming people out—will actively speak out against positive attitudes, while others will avoid “getting their hopes up” because they don’t want to be disappointed.

But, if Bullard’s optimism is to be believed—and we’re choosing to think it is—you have full permission to let yourself hope, at least for now.

Remember, there are a couple of things you can do to bolster your immune system without medicine during this time. One of them involves keeping a positive outlook, and the other one is eating plenty of garlic; we’ve found that one accompanies the other.

This story was first published in our Real Estate section.

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Business Finance

Gov. Cuomo first to issue 90-day moratorium on commercial, residential evictions

(NEWS) NY Governor, Andrew Cuomo is the first state leader to put a halt to all commercial and residential payments in an effort to stem the COVID-19 crisis.

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New York Governor, Andrew Cuomo is the first state governor to put a moratorium on residential and commercial evictions in response to the COVID-19 outbreak, specifically hitting pause for 90 days in his state. This is part of a $10B relief package that includes utility payments missed during this outbreak as the state (and all states) are strained by the global pandemic.

This will not only help renters to find stable footing as so many have lost their jobs overnight, but commercial renters (like restaurants) that are worried about being evicted during a time that they were shut down by the government.

Reactions have mostly been positive, but many are still pushing for a freeze on rent, essentially rent forgiveness during this period since mortgage holders can roll their 90 days on to the end of their loan term, but renters cannot.

For many landlords, rent is their exclusive income and they have very few units, but they too will be under a mortgage freeze on their buildings under this Order, providing some relief. Not to mention Tax Day just moved from April 15 to July 15.

Meanwhile, a state group, Housing Justice for All, is calling for the rehousing of every homeless individual using emergency rent assistance and in vacant homes. They cite the risk of viral spread through the homeless shelter system, as well as viral possibilities among homeless people living on the streets.

There is no known answer in this time of being tested, but a freeze on rents and mortgages in New York will likely lead to other governors taking the same route, and renters might be able to breathe a little better soon, especially those who have lost their jobs and independent contractors whose business immediately died on the vine.

We’ll be watching for other states’ reactions to rents and mortgage payments.

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Business Finance

COVID-19: Self employed Texans get some relief benefits

(BUSINESS FINANCE) Self employed? Worried about the corona virus hurting your business? Texas says you’re STILL eligible for cash-related COVID-19 coverage!

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When I heard ‘It’s hard being your own boss’, I thought people meant employee reviews were harder to do since you have to carry both parts of a tough conversation in your home office.

Now, watching as self-employed artists, caterers, events specialists and more are struggling in the wake of the COVID-19 pandemic, the image is less ‘Ha!’ and more ‘AH!’.

It’s bad out there, y’all. And my heart goes out virtually, as per CDC guidelines. But in every viral cloud, there’s a colloidal silver lining. In the great state of Texas, that lining is: You’re probably eligible for disaster-based unemployment.

Yes, really!

Straight from the Texas Workforce Commission’s mouth: If your employment has been affected by the coronavirus (COVID-19), apply for benefits either online at any time using Unemployment Benefits Services or by calling TWC’s Tele-Center at 800-939-6631 from 8 a.m.-6 p.m. Central Time Monday through Friday.

Now how does that cover the self-employed? Simple…kinda.

You’ll need to apply through the Disaster Unemployment Assistance and then take the extra steps of providing different proof than your 9-5 friends.

Firstly, you have to prove you’re self employed. If you’ve been paying you under the table, this is where the poop hits the fan, I’m afraid. The government will need things like (any given one of these): Insurance bills, business license, a recent ad, an invoice, or sales records.

Were you just about to start your own business when all this went down? Fortunately you’re covered too, so long as you have proof of prospective self-employment, say: The deed to a building you just bought, loan documents, ‘Grand Opening’ announcements, and so forth.

For the full list of documents that suffice, visit the TWC site directly and check what proof your pudding needs.

This situation is a Corona-cluster-cussword, but there’s help out there.

Reach out. Grab it. And then wash your hands.

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