Dietary supplement companies can purchase a commercial general liability policy that includes basic products liability protection. Such a policy will provide good foundational insurance coverage for liability claims resulting from a variety of incidents. A good general liability policy should be the first insurance policy a dietary supplement company purchases, but it may not be enough to cover the company adequately.
General Liability And Products Liability Policy Basics For Dietary Supplements
A general liability policy is a policy that protects the company from bearing the cost of injury when the company’s actions or inaction caused injury to someone or someone else’s property. A classic example is a slip and fall case — a visitor to the company’s premises slips on a wet floor and breaks a leg. All states require general liability insurance as a condition to doing business in that state.
For a dietary supplements company, a general liability policy also should include some amount of products liability coverage. Products liability insurance protects the insured dietary supplements company from bearing the cost of paying out-of-pocket damages resulting from physical injury, sickness, disease, and even death resulting from consuming or using the company’s product.
Dietary supplement companies face the risk of being held liable for their products if:
- The product itself is dangerous,
- The product has been contaminated,
- A label failed to warn about the product’s risks, or
- Other injuries that resulted from consuming the product.
With products liability coverage, the insurance company will pay for the legal defense against the claim, which is an often underappreciated and overlooked aspect of the policy. Insurance also pays the resulting damage award up to the policy limits. It generally covers claims against the insured dietary supplement company for products liability based on manufacture, repacking, relabeling and distribution of the company’s products.
Dietary supplement companies need to understand upfront what is covered and what is not covered under their general liability and products liability policy. It is dangerous to find out only when a lawsuit is filed that the claim is excluded from coverage.
As stated earlier, product liability insurance is usually purchased as part of a general liability policy, but product liability insurance may also be purchased on a standalone basis. Whether included in the general liability policy or purchased separately, products liability policies will not cover all product liability risks. A dietary supplement company must understand the policy limits.
Every product liability policy will have exclusions of ingredients or based on certain types of ingredients. For that reason, a dietary supplement company must ensure that its insurance broker knows all of the ingredients contained in the company’s products and that the company is aware of all excluded ingredients in the policy being offered. If the product contains a banned ingredient, the coverage can be limited or even nullified.
If a company finds an ingredient in its product is excluded from coverage, it should check with another insurance carrier. Insurance carriers can have different ingredients on their excluded lists. Also, when a policy renews, it may have a new exclusion list that differs from the prior list.
Accordingly, a dietary supplement company needs to review the ingredient exclusion terms of its product liability policy every year and ensure that all of the ingredients in its product remain covered, either as a single ingredient product or as part of a formulation. If an ingredient is on the excluded list, the company needs to negotiate with the insurer to cover it through an endorsement to the policy. The company will likely have to pay an additional premium for the coverage.
Make sure the coverage limits are adequate and the policy covers injuries caused by negligence. Sometimes a product is defective, despite rigorous quality control, product testing, and compliance with best practices. In such negligence cases, the product may become dangerous enough to cause adverse side effects or reactions or even interfere with non-prescription or prescription drugs.
To protect itself from these accidents, any company that supplies, manufactures, sells, imports, packages, or formulates any type of dietary supplement, ingredients, or food-related products, needs adequate product liability insurance coverage. Not only does the company protect itself through this insurance, it protects the consumers who are injured by consuming the product. Dietary supplement companies must take care that their coverage limits are appropriate. In selecting the policy, the company should make sure it covers as many risks as is practical.
Enhancements To Insurance Coverage For Dietary Supplement Companies
Depending on the nature of risks faced by a dietary supplement company, the company may want to consider coverage enhancements to its products liability policy such as:
- Government-mandated product recall coverage that applies under certain conditions when the government issues a formal, written product recall plan.
- Bodily injury coverage due to mold and silica, both of which are standard exclusions.
- Worldwide coverage to extend products liability protection to products sold anywhere in the world.
For More Information About Products Liability Insurance For Dietary Supplement Companies, Contact The Insurance Professionals At Southern Insurance
At Southern Insurance, the agents are experienced with dietary supplement insurance and understand the risks this industry faces. Reach out to a specialty insurance agent for more information today.