If you are in business and sell products outside of the European Union you will have no doubt considered selling into the vast markets of the USA & Canada. However, if you have ever made enquiries from your existing insurers regarding selling into these markets you will be familiar with the cost barrier of USA Product Liability Insurance.
The team at Butler Evans have advised our customers on the routes to obtaining USA Product Liability insurance for well over 10 years and have built up a great deal of experience & expertise in this area, as well as contacts with major insurers in the market who can provide insurance solutions. This briefing answers some common questions we are asked by customers.
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Why is USA Product Liability Insurance so Expensive?
There are a few reasons for the cost of USA Product Liability Insurance being a lot higher than selling the same products in the EU or elsewhere. The primary factor is that the USA & Canada have highly litigious legal systems focused on consumer protection and punishing ‘manufacturers’ who sell products that bring risks of injury. This means litigation is encouraged in the USA and when a consumer succeeds in their case the courts often seek to enforce ‘punitive’ damages over and beyond the financial losses the consumer has actually suffered. This leads to expensive legal battles and costly damages awards that mean Insurers need to charge higher USA Product Liability Insurance premiums to cover their claims.
Why can’t my existing insurer cover me for USA Product Liability Insurance?
Insurers from the UK have specific policies and target business that they have built up data, knowledge & experience to underwrite. This is particularly the case with direct to customer Insurers who are very inflexible. Insurers Product pricing is aligned with their specific parameters, once your business activities fall outside of these then it is usually a decline.
Do we need to buy USA Product Liability Insurance when we are a UK Company?
USA Product Liability arises in much the same way as in the UK. A manufacturer owes a duty of care to their customers to ensure any product is safe and will not cause injury, if that duty is breached and an injury occurs the manufacturer will be liable. The North American courts do not distinguish these duties between US/Canadian domiciled manufacturers and those domiciled overseas. The question is one of whether it is likely a consumer will win a case and make a recovery.
Having a UK domiciled company provides some protection from direct litigation in USA & Canadian courts, however our legal systems are fairly closely aligned and judgements in North American courts can be enforced through the UK courts against the UK company. Some factors will give rise to a greater likelihood of court action in North America as it gives a greater likelihood of securing payment of any damages:
- Having a US/Canadian domiciled subsidiary company
- Having property assets and deposits in the Us/Canada that could be targeted by plaintiffs to fund compensation
- Having contracts that allow US/Canadian domiciled agents to benefit from your insurance policies
- Having a worldwide brand that could face Public Relations damage
Avoiding these scenarios helps reduce the likelihood of spurious claims, but in the event of a serious injury with obvious negligence it is likely litigation would follow.
Product Liability Insurance is an optional business insurance protection without any statutory requirement to purchase, however companies should carefully consider their risks of not having this coverage due to the potential for large financial losses that could have a significant effect on a business. Product Liability Insurance for sales in the UK are relatively cheap to insure and is therefore prudent to purchase, but when it comes to USA Product Liability Insurance the levels of costs can challenge that view and business may wish to look to alternatives.
Insurance is only one of a variety of risk management strategies a business can employ to protect themselves. insurance is attractive because it transfers all the risk, however faced with high premium costs a company may wish to look to a combination of alternatives.
These alternatives can include a mix of:
- Licensing selling agents in the US/Canada who is contracted to purchase USA Product Liability Insurance from a US domiciled Insurer, naming the supplier/manufacturer as beneficiary, often a much more affordable terms.
- Forming a subsidiary company to manufacture/distribute the products being sold into US/Canada, such company holding minimal assets and ring-fenced from the main group.
- Purchasing USA Product Liability Insurance that covers sales into the territory, but excludes court action first brought in US/Canadian courts.
- Retaining self-insured excess points that allow Insurers to underwrite only the significant events.
- Self-insurance through the ‘protected cell captive’ route.
Why get your USA Product Liability Insurance from Butler Evans?
As a specialist Insurance Broker with years of expertise and experience in this product our staff provide the best advice and have access to the specialist Insurers in the market that will enable our customers to arrange affordable cover through insurance or a mix of insurance and alternative strategies.
We provide comprehensive Commercial Business Insurance programmes into which USA Product Liability Insurance can be embedded or which wrap around to provide dovetailed insurance protection.
If you would like to have a no obligation discussion please do get in touch by calling us on 08454310448, emailing is at firstname.lastname@example.org or using the contact form above.