Let’s say a company makes a nutraceutical product, like a vitamin capsule, that helps people absorb nutrients from food more efficiently. On the product label, it specifically states that users should consult their physician before taking the product, and that sometimes an allergic reaction could occur. That should cover the business, right? I mean, it says right there that a risk of allergic reaction is present. Unfortunately, people don’t always read product warning labels and disclaimers, and not everyone heeds the warnings or realizes that they have a condition that will result in a negative reaction to the product.
So what happens if someone ends up in the hospital for severe digestive problems or an allergic reaction to the product? They could sue the company and demand payment for medical expenses. Does a disclaimer automatically stop those demands? No. Sometimes people will be deterred by the presence of a disclaimer, but usually not. A lawsuit would be served and lawyers would then be involved. So who pays for the legal services? If the manufacturer of that product doesn’t have insurance or even the right insurance, then they have to pay legal expenses out of pocket. Legal fees are not cheap.
During a hearing, trial, or mediation of an incident, a disclaimer could create a more favorable environment for the business. This could mean that the demand for compensation could be reduced, the lawsuit could be dropped, or it could mean nothing, especially if a legal professional didn’t write the disclaimer. The right product liability insurance policy will cover legal fees and, if the business is found legally responsible for the bodily injury or property damage claimed, the policy could also pay for compensatory damages, medical expenses, punitive and statutory damages, and economic damages.
Any business within the stream of commerce, including manufacturers, retail, distribution, wholesalers, etc. needs to have product liability insurance or products/completed operations included in their general liability policy in order to adequately protect their business.