Product Liability Insurance for Vapes, E-cigarettes, and E-Juice

What is Product Liability Insurance?

Product Liability Insurance provides defense and indemnity coverage against bodily injury or property damage brought by a third party against the manufacturer or seller of the product.  The bodily injury or property damage can be caused by a defective product, lack of user instructions, or lack of warnings for safe use and handling.

Who is responsible for a product which is sold to a consumer?

There is much confusion regarding who is liable for a product which caused injury and it is always assumed that the manufacturer bears all of the responsibility.  In most law suits the importer, distributor, manufacturer, and retailer are sued.  Most manufacturers in China are fractionally or wholly owned by the government.  As such, American tort laws cannot be enforced due to their immunity as government owned entities.  This means that ultimately the importer becomes the de-facto manufacturer.  Let’s assume that a consumer product is imported, then a distributor delivers the product to a retailer.  In the event of a claim everyone in the chain of commerce is liable for the product regardless of their ownership of the product.  It would be at the end of the trial or mediation that a judge will assign a particular market share for each entity involved the chain of commerce.

How much does Product Liability Cost?

In most cases there are two factors.  Minimum annual premiums and rate per $1,000 of sales.  Minimum annual premiums essentially mean that the insurance company has set a minimum annual premium (MP) regardless of what your annual sales are.  Charging a particular dollar per $1,000 of sales is determined by the underwriter.  Here is an example: your annual sales are $500,000 and the rate assigned by the underwriter is $1.00 per $1,000 of sales; therefore divide 500,000 by 1,000 then multiply by  1.00 = Annual Premium of $500.  If the minimum premium for a policy is $2,000 but your sales volume places your premium at $500 you will still be charged $2,000.  There is an upside to all of this.  You have an opportunity to have more sales without having to pay an additional audit premium at the end of the policy term.  Due to the wide variety of scenarios it would be better to contact us for a Product Liability Insurance quote and in most cases we can provide an indication over the phone.

Product Liability Insurance for the Vape Industry

The Vape Industry is facing among other issues an uphill battle with with consumer attorneys who are after two things: billable hours and recognition.  There are two primary exposures for e-cigarettes, vapes, and e-liquids/e-juice products.  For the e-cigarettes and vape products the exposures come from defective products or products which lack specific instructions and warnings.  These products can explode, burn, or cause severe property damage.  Here are some examples of what could go wrong: charging a unit with a different cable not approved for the device and ultimately leads to a fire that burns down a house or a device auto-firing because the end use did not turn off the device.  Tort Law and Strict Liability Law requires that a manufacturer or seller (this includes Vapes Shops) to provide written warnings and instructions for safe use and handling for all products.  Ever notice the vinyl sticker that advises you not to put the hair dryer in the bath tub?  There is a reason for that.

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