Product liability insurance for your own products

Discussion in 'Off-Topic' started by MrSoftware, Mar 17, 2016.

  1. MrSoftware

    Thread Starter Active Member

    Oct 29, 2013
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    I'm having trouble finding product liability insurance for a product that I manufacture myself, or have manufactured in China, and honestly I'm not even sure insurance is necessary. Is anyone familiar with product liability law (in the USA)? I called several product liability attorneys in my area and offered to pay their hourly rate for a couple hours of consultation, but they wouldn't talk to me since I wasn't suing anyone.

    Long story short; I'm attaching wires to 25v 10,000ufd capacitors, dipping them in rubber to make the rugged, and selling them as emergency replacements for motorcycle batteries. These specific motorcycles will not run without either a battery or capacitor, so these get people from A to B when their battery fails. My fear is either a bad capacitor catching fire, or some idiot doing something stupid and causing a fire and then suing me. I realize the risk is minuscule, especially for an emergency-only device, but I'm in Florida, the most litigious state in the union, so it still makes me nervous. Has anyone been down a similar road who can offer tips, or suggest a Florida liability attorney who will chat for a couple hours if I pay their hourly rate?
     
  2. WBahn

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    Mar 31, 2012
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    Can't recommend anyone in Florida. Sorry.

    Are you doing this as a sole-proprietorship (or individual) or are you under the umbrella of something like an LLC?

    If the former, one option is to get umbrella insurance for yourself. It's generally pretty cheap -- a couple hundred dollars a year for a couple million dollars of coverage. But you would need to be sure that it would cover your personal liability that might arise as a result of a lawsuite surrounding this product.
     
  3. ErnieM

    AAC Fanatic!

    Apr 24, 2011
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    I know of at least one company that stopped selling replacement parts for their product after someone did something stupid and sued. While the case had no merrit they still had to hire an expensive attorney.

    I would definitely speak to an attorney.

    Heck, my wife has a company where they clean chairs and she carries 10 million in liability insurance.
     
  4. MrSoftware

    Thread Starter Active Member

    Oct 29, 2013
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    I'm operating under an S-Corp, but it doesn't have the cash for any sort of legal battle, so my fear is they would try to find some error in my S-Corp paperwork to use as a way to invalidate the S-Corp and come after me personally. I don't know how all that legal stuff works so I could be afraid of nothing, but I really don't know.

    It's so frustrating that the lawyers have made things so bad that you're afraid to work and earn a living..
     
  5. WBahn

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    In fact it's pretty amazing how little it costs to get significantly higher liability coverage in most instances. Even for your automobile going to six or ten times the minimum liability adds only a fraction of the premium cost for minimum liability. This is one area where the free market works pretty well because high-coverage liability is not in demand (it is essentially a luxury good), nor is it mandated or heavily regulated, so providers have to be very price competitive to get market share. It's also a very good example of what insurance is supposed to be -- spreading the risk associated with rare, but outrageously expensive, events.
     
  6. WBahn

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    You definitely want to make sure that you have all your paperwork in place and that you are meeting all of the reporting and meeting and recording requirements and that you are in no way intermingling assets or finances. Those are the big ways that they pierce the corporate veil. Most of the others are pretty legitimate -- if you are willfully doing something negligent or illegal, for instance -- in which you SHOULD be exposed to liability.

    I think most umbrella policies will cover you should the veil get pierced since the presence of that shield in the first place significantly reduces the risk to the insurer.

    But you would really need to talk to the insurance carrier and read the fine print regarding not only what is covered, but under what conditions coverage can be voided.

    I know the feeling. What really pisses me off is that if you or I make a mistake, no matter how minor or inadvertent, the legal consensus is that we are fully accountable for any and all damages that result. But the legal (and the closely-related legislative and executive) professions specifically exempt themselves from any similar accountability. If you shovel your sidewalk and miss a patch of ice and someone falls and breaks their neck, you are fully liable. If a judge erroneously lets a plaintiff out on bail when the crime they were charged with is not eligible for bail and that person then goes out and murders someone the next day, the judge isn't liable in any way because, well, mistakes happen and if an attorney or judge were subject to penalties for honest mistakes it would really hamper the judicial process. That exact thing happened here a number of years ago and the judge is still on the bench and had nothing happen to her because that is the justification they used.
     
  7. recklessrog

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    May 23, 2013
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    I have a question for the TS, Out of interest, do you expect a 10,000mFd capacitor to start a motor cycle? or if it is required to be in circuit for some reason and the battery is flat, how do you crank the engine, does it have a kick start or do you just bump start it? :)
     
  8. Alec_t

    AAC Fanatic!

    Sep 17, 2013
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    That much might, but I doubt 10,000uF (as per the OP) would.
     
  9. Lestraveled

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    May 19, 2014
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    The best thing to do is to talk with your personal insurance company. An umbrella policy will cover you, but not your business unless specifically stated. Talk to them.

    Product liability insurance premiums are based on what you are selling and how many items you are selling. If it has a possibility of starting a fire the premiums will be high. I developed an automotive battery product and there was no way I could break even and pay for liability insurance.

    If you sell ANYTHING you can be sued. The suite may be frivolous but it will cost you thousands to get it thrown out. Frivolous suites are often brought against small companies with no insurance because they are really looking for a payoff to keep it from going to court.
     
  10. WBahn

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    Mar 31, 2012
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    I was wondering the same things, but since I can't imagine that you would carry them around charged, I suspect that you would put it in place of the battery and then kick start it. The capacitor bank isn't there to actually supply any energy, it is there to serve as the energy sump to make the electric system happy enough to function.
     
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  11. Glenn Holland

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    Dec 26, 2014
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    I used to work in the elevator business and I'm very familiar with the "Restatement Of Torts" which is the basis for product liability in the U.S.

    My opinion is to sell your invention to a large company rather than to manufacture and market it yourself.
     
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  12. Lestraveled

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    May 19, 2014
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    I highly agree.
     
  13. MrSoftware

    Thread Starter Active Member

    Oct 29, 2013
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    The bikes also have kick-starters. The electrical systems have shunt type regulators which put out horrible power, and without a battery or cap in the system, the fuel injection just won't function. The cap works as a filter.

    It's just a capacitor with some wires, no patent or anything special. There's nothing proprietary for me to sell to a larger company.

    It's just a capacitor and I really can't see it starting a fire, and with a 25v rating even if they connect it backwards it should be safe (12v electrical system), so I'm considering just putting a big disclaimer on it and selling it. Something along the lines of not professionally safety tested, use at your own risk type of thing. But I sure would prefer to have insurance or some other way to limit my liability.
     
  14. GopherT

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    Nov 23, 2012
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    Form an LLC because you can have the LLC declare bankruptcy if someone sues you - I imagine you don't care about the company as much as protecting your personal finances. Once you have the LLC, you buy Officers and Directors insurance ($10M and all is good). It would cost about $250 to $500/year. You don't need to insure the product, just cover your own ass. If your profits aren't worth the effort after you pay for insurance, then sell the idea and let someone else handle it.
     
  15. MrSoftware

    Thread Starter Active Member

    Oct 29, 2013
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    Even $1k for insurance would be fine, if I can get it. Maybe I was looking for the wrong kind of insurance. Do you know if I can get the same insurance for an s-corp, which is how I'm currently organized?
     
  16. GopherT

    AAC Fanatic!

    Nov 23, 2012
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    Google commercial insurance

    Here is NATIONWIDE
    click insurance types, then "business owner" for a start.

    Edit: business liability insurance, and business owner.

    https://www.nationwide.com/small-business-insurance.jsp
     
  17. Lestraveled

    Well-Known Member

    May 19, 2014
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    People are stupid or worse, they are devious. They will plug your 12 volt device into a wall outlet and blame you because it blew up. One devious immoral prick can destroy you.
     
  18. jpanhalt

    AAC Fanatic!

    Jan 18, 2008
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    @MrSoftware
    1) If you ask an attorney whether you need product liability insurance, I suspect the answer will be yes. Logically, if the attorney told you "no" and you got sued, who do you think you might sue?

    2) Finding product liability insurance might be difficult. In your situation, you have to consider costs for covering products you have already sold before you bought insurance (so-called "head" insurance) and insurance for products sold after you have insurance but no longer are selling products (so-called "tail" insurance). In evaluating risk, your potential insurer may ask why you are suddenly interested in getting insurance. That is, do you know something you are not disclosing -- they are a suspicious lot. Product liability can extend well past the period during which you made and sold products. An insurance company will be very hesitant to provide coverage only for products produced between a certain period. It is more likely that you will get coverage for claims made just during the period for which you are paying premiums. The risks in providing "tail" coverage are very difficult to assess, so such insurance may be very expensive.

    3) I believe you need both insurance and a discussion of your Sub-S organization. For such advice you need a business attorney, not a litigator. They charge by the hour and can be quite expensive. Expect a lot of the time charged to be for "research," not just chatting in the office. Jones Day (http://www.top-law-schools.com/jones-day.html) is a well known example of such firms. For a small company like yours, you might consider a smaller, local firm. I certainly would.

    In sum, I think you are going to be surprised at the cost. The solution may well be a combination of insurance for current practice and a corporate structure to product you when you are no longer making the product.

    John
     
  19. #12

    Expert

    Nov 30, 2010
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    There seems to be a difference between Lawyers and everybody else. I am expected to know my specialty before I arrive.:confused:
     
  20. MrSoftware

    Thread Starter Active Member

    Oct 29, 2013
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    Thanks everyone. It sounds like the bottom line is I really need to find an attorney that will talk to me, so I can at least get an idea for what my risk really is, and play it from there.

    Does anyone know how well disclaimers hold up? i.e. if I just stuck a label across it that must be read before it's installed that reads "this device has not been evaluated for safety, use at your own risk" or something similar. Does anyone have insight as to whether these types of things really hold up in court?
     
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