Can a business be sued for a product it sells?
Product liability is a business’s legal responsibility if a product it makes or sells causes an injury, illness, or property damage. And if a customer claims that a product injures them or damages their property, they could sue one or more of the businesses in the supply chain — including the business who sold the product.
If a customer believes your product caused them harm, your business could be named in a claim. Here are a few examples of what a product liability claim could look like for a retailer:
- A skincare product causes an allergic reaction. A local soap and skincare company has their own private label line of products manufactured for them. A customer claims the product caused a severe skin reaction that requires medical attention and causes them to miss work for a week. The customer sues both businesses.
- A candle starts a fire. A customer buys a handmade candle from your online store. They claim it overheated and damaged an expensive piece of furniture, leading to a claim.
- A pet treat makes an animal sick. A pet owner buys treats from your store and they claim it made their dog seriously ill. Even if you didn’t manufacture the treats, your business and your co-packer/manufacturer could still be named in a lawsuit to recover vet bills.
- A folding chair collapses and injures someone. A customer buys a folding chair from your hardware store. It breaks during normal use and causes a physical injury that results in medical bills. The result could be a claim against your business.
Many product liability claims come down to the customer’s belief that the product wasn’t as safe as it should have been. Sometimes the problem happens during product manufacturing. Other times it’s the product’s design. Maybe customers weren’t given enough information on how to use the product safely.
A single claim can involve several companies in the supply chain, depending on how the product was designed, made, marketed and sold. Businesses commonly named in product liability claims include:
- Manufacturers who design or make the product.
- Importers who bring products into the U.S. to sell.
- Distributors or wholesalers who supply products to retailers.
- Retail stores who sell the product, from local boutiques to hardware stores and pet shops.
- Online sellers, including businesses that sell through third-party markets like Amazon, Shopify, Etsy or eBay.
- Private-label brands which sell products under their own name, even if another company manufactured them.
If a customer is injured or their property is damaged, it’s common for multiple businesses to be named in the same lawsuit.
“Wait…I didn’t even make it.”
This is one of the biggest misconceptions for retailers about product liability. Many business owners assume responsibility begins and ends with the manufacturer. But in reality, customers often don’t know where a problem started — and they don’t have to figure that out before filing a claim.
Instead, they may name several businesses involved with the product, including the retailer. The courts and insurance companies then work to determine who may be at fault.
Being named in a lawsuit doesn’t automatically mean your business did anything wrong. But it can mean dealing with the costs of defending your business while the claim is resolved.
Which types of product problems could lead to liability claims for a seller?
These are some of the most common types of product defects that could lead to liability claims.
| What it means | Example |
|---|
| Manufacturing defects | There was a mistake at the factory or during assembly. | A batch of water bottles has faulty seals that cause them to leak. |
| Design defects | There was an error in the blueprint of the product that renders it unsafe, even if it’s manufactured according to plans. | A table is unstable and tips too easily during normal use. |
| Missing instructions or warnings | The product doesn’t include adequate directions or safety warnings | A cleaning product doesn’t warn users to wear gloves or avoid mixing it with certain chemicals, resulting in skin irritation or toxicity. |
Manufacturing defects
These problems usually affect a specific batch or group of products. It could be a problem with the materials being used or an issue with the product’s assembly.
Design defects
Sometimes nothing went wrong during manufacturing — the product was built to specifications. The issue is that the design itself created a safety risk when the product is used as intended.
Missing instructions or warnings
Even a well-made product can create problems if customers aren’t told how to use it safely. Confusing instructions, unclear labels or missing safety warnings can all become part of a claim.
Product liability claims can be complex. In some cases, more than one of these issues may be involved. Determining which part of the supply chain is at fault can take time.
6 tips for retailers and online retailers to help reduce product liability risk
You can’t eliminate every risk, but you can make product liability claims less likely. A few smart habits can go a long way. Here are some of the best ways to reduce your risk:
- Stay on top of product recalls. Even well-known brands issue recalls from time to time. If a product you sell is recalled, stop selling it immediately and follow the manufacturer’s instructions. Acting quickly helps protect your customers and limits your exposure. To check if a product has been recalled or is subject to a safety warning, the U.S. Consumer Product Safety Commission (CPSC) maintains a searchable database of consumer product recalls and safety notices.
- Know who you’re buying from. Work with reputable manufacturers and wholesalers that follow product safety standards and have a track record of quality. If something seems too good to be true — like unusually cheap inventory — it’s worth a closer look.
- Keep transaction records. Save invoices, supplier details and purchase orders so you can trace where the products you sell came from. If your products include lot, batch or serial numbers, keep those organized as well. This information can be critical if you ever need to respond to a complaint or recall.
- Give new inventory a quick once-over. Check new or incoming stock for visible damage, missing parts or packaging issues. Catching problems early can help reduce the chance that a defective product reaches a customer.
- Don’t modify products without understanding the risks. Even small changes — like repackaging or bundling products — can affect safety or performance. If you alter a product in any way, make sure you understand how that change could impact your liability.
- Take customer complaints seriously. Customer complaints aren’t always just customer service issues. Paying attention can help you spot patterns before they become bigger problems.
How product liability insurance could help protect a business
If you manufacture your own products, sell products online or stock inventory in a retail store, product liability insurance won’t prevent a claim from happening, but it could help protect your business from the financial impact of a claim.
Product liability insurance, included with ERGO NEXT general liability insurance for retail stores, e-commerce and market vendors, could help protect your business from costs if a customer claims a product you made or sold caused them property damage, bodily injury or some other kind of harm that cost them money. This coverage could help if you’re sued over a covered claim, and it could help pay legal defense costs and settlements, depending on your policy.
