As a wholesaler of products, you assist in placing millions of products into stores, businesses, and the hands of consumers. If one of these products hurt someone or damaged their property, you could be facing hefty lawsuits, recalls, and a serious threat to your reputation.
That’s where wholesaler product liability insurance can help.
What Is Wholesalers' Product Liability Insurance?
Wholesalers’ product liability insurance protects wholesale businesses in the event one of their products causes injuries or other damages to a third party.
A wholesaler is a person or company that sells goods in large quantities at low prices, typically to retailers. Essentially, wholesalers are the middleman between a manufacturer and a retailer.
In the insurance world, wholesalers’ product liability insurance is no different than your standard product liability insurance—other than it may be marketed specifically to wholesalers by explaining the policy in regard to this industry. This means you don’t have to go on the hunt for any special policies. Most product liability policies can be tailored to meet a wholesaler’s needs, such as adjusting limits or adding additional coverages.
Do I Need Wholesaler Product Liability Coverage If I Have General Liability Insurance?
To put it simply: it depends on your plan. You may still need product liability insurance even if you have a general liability policy. This is because some general liability policies do not include coverage for product liability claims.
To understand this question, it helps to understand there are different parts of a general liability policy. Each part plays an important role in protecting your business.
- Coverage A: Bodily Injury and Property Damage Liability
- Coverage B: Personal and Advertising Injury Liability
- Coverage C: Medical Payments Liability
For our purposes, we are going to focus on Coverage A: Bodily Injury and Property Damage Liability. Within this coverage, there are two inherent risk types—risks from product liability and risks from premises liability.
Product liability comes into play when you make, sell or distribute products like lotions, food products, or vitamins. Premises liability (aka general liability) comes into play when someone comes onto your premises such as a store or doctor’s office and gets hurt. Most businesses have some of both risk types, but may be skewed depending on their business focus.
For instance, a company that manufactures or is a wholesaler of widgets may not have very many people that come to their premises but they surely have a lot of folks that buy their products. Conversely, an office-type business may not have that many products they sell, but they have premises liability in case someone slips and falls while at their office.
It is important to note if the Bodily Injury and Property Damage Liability portion of your coverage applies to products and premises. If it does not apply to products, then you would need to seek out a product liability insurance policy to supplement your coverage.
“I only sell or distribute my products, I don’t make them. Do I still need wholesaler product liability?”
Yes, you’ll likely find you need wholesalers product liability insurance. The reason is simple: if your business has a part in the product life cycle, you could be held liable for injury or damage to a third party.
It is common for an injured party to file a claim against all entities involved in the product life cycle. The best way to protect your business is to get an insurance policy that includes product liability insurance.
As mentioned above, wholesalers are the middleman between the manufacturer and the retailer.
From a risk management perspective, this means that you have some additional risks: you are not in direct control over the manufacturing of the items or the direct-to-consumer distribution. From a product liability perspective, this means that you are somewhat at the mercy of the manufacturer and the retailer.
If the goods are not manufactured in a safe & compliant manner, they could be defective or dangerous. If the products are not stored and distributed in a safe manner by the retailer, they could cause injury as well. If a claim is filed on a product you help to distribute, you could be included in a lawsuit.
The best way to protect your business in this type of scenario is to have product liability coverage.
Example Of A Wholesaler Product Liability Claim
A good way to understand how a wholesaler could be named in a product liability claim is to study an example.
Let’s say a customer has a negative reaction to a vitamin that puts them in the hospital and now they want to sue. Their lawsuit could name the manufacturer who made the vitamins, the retail store where they bought the vitamins, and the wholesaler who sold the vitamins to the store. All three parties could be responsible for paying the injured customers hospital bills, lost wages, and legal fees.
Additionally, even if the person who experienced the negative reaction does not call you into the lawsuit as a defendant, either the manufacturer or the retailer could and likely would. They could allege that the damage to the vitamins that caused the customer’s reaction occurred while the product was in your care, or that you did not store the products appropriately.
Sometimes the blame isn’t very clear cut, so all members of the production and distribution are found to be faulty parties. Even if you’re not found guilty, the defense costs alone could be financially devastating for your business.
So how can you best avoid situations like this and better protect your business? The answer is simple: purchase wholesalers’ product liability insurance!