product defects, product liability, product management, public liability insurance香港

Millions of products are created and sold daily all over the world. Every product business has a duty to provide the best product they can while ensuring it is safe for the intended customers.

There is always a chance a product may not be as safe as a company may believe. Products could cause customer injury or property damage. Either way, the business involved will be held legally liable, which includes the designer, manufacturer and distributor.

Each product falls under a specific industry, and each industry makes a range of different products. For example, a computer mouse will fall under the electronic industry. Every industry has a risk that their products may cause third-party injuries or property damage, but some industries have a higher risk.

Hence, the article will highlight the top industries with the most product defects that lead to product liability claims.

What Are Product Defects?

A product defect is an error in the product design, manufacturing packaging or marketing that causes an individual or group physical damage. The damage can include third-party injury or property damage, specifically due to the product.

Product defects can lead to lawsuits against the related companies for medical, repair and compensation costs. Product defects can fall under three types of categories, which are:

  • Design Defects: defects in the product design stage that are dangerous to customers even if manufactured correctly. The fault will appear in all produced products.
  • Manufacturing Defects: defects that occurred while the product was produced, assembled or packaged. The flaw could affect some products and has a lower chance of all products being defective.
  • Labelling Defects: defects when the product fails to provide detailed labels or warnings on risks and proper use. The defect is also known as a marketing defect.

Every business involved in the product process needs product liability insurance to cover product defect claims. Additionally, companies will also benefit from product recall insurance to cover the cost of recalling a large amount of defective products.

Top Industries with Most Product Defect Claims

Automobile Industry 

The automobile industry includes companies that focus on producing and selling vehicles. The industry consists of various international and local companies. Due to the complex process and various components, automobile businesses can always be part of product defect claims.

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The industry constantly faces many product defects, which have led to expensive lawsuits. Even the most significant international companies have faced unfortunate product liability claims.

For example, the most popular automobile brand, Toyota, faced lawsuits due to a product defect in the Toyota Camry car. The product defect resulted in sudden uncontrollable acceleration, leading to accidents. The company had to pay around USD 1.1 billion to settle claims.

Every company in the industry must understand that product defect claims may occur at any point, and quick actions can result in millions in financial loss. Even with attention to detail, errors can occur, and companies must have a strategy to deal with the consequences.

Food & Beverage Industry 

The food and beverage (F&B) industry comprises any company that manufactures, packages or sells any food or beverage. The industry is always at risk of product defects due to the ingredients, packaging or contamination.

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Food product defects can cause serious customer illness and lead to costly settlements. Due to the number of products and the high chance of errors, there have been many product defect claims in the industry. The mistakes may be completely accidental or due to negligence, but either way, the company will be liable and will have to compensate the affected party.

For example, Kraft Heinz recalled around 6,000 cases of their Caprisun drink as it was contaminated with diluted cleaning solution, which is toxic to consume. The contamination occurred due to the food processing equipment error. The customer’s complaint brought the defect to light, and the company avoided many lawsuits due to the quick recall.

Food and beverage product defects can occur to any manufacturer, seller, restaurant, bar, etc. Some companies that have also been sued due to product defects include McDonalds, A&W, Cheerios and many more. As an F&B business, you must have a plan against such defects and lawsuits that follow.

Electronic Industry

The electronic product industry consists of a range of electronic technology products, such as phones, TVs, house appliances and many more. When consumers purchase electronics, they expect it to perform the intended duty in the safest way.

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The electronic industry deals with a high range of product defect claims due to the constant increase in products, international distribution and poor manufacturing. Electronic defects result in fires and explosions, leading to severe injuries and property damage.

For example, the famous case of 500 Samsung Galaxy Note 7 phones exploding, injuring customers and damaging nearby property. The explosion was due to the faulty battery, resulting in USD 1 billion in settlement and recall costs.

There are many electronic product defects worldwide, which lead to costly lawsuits. The claims could occur to any electronic company and product. It is only fair for the company to pay for their wrongs, but sometimes, the costs can bankrupt a business without the proper insurance solutions.

Toy Industry 

The toy industry is a sensitive industry due to the age range of the target market. Children will play with the toys they want and do not worry about safety. Hence, it is the toy company’s job to make sure no matter how it is used, the product is safe.

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Defective toys can lead to choking, deep cuts, poisoning and more. The danger can arise due to small parts, toxic materials or paint or poor age restriction labelling/ instructions. If a parent believes their child has been injured due to a toy, they will sue the company for compensation.

For example, if a child chews on one of his new toys, parents think nothing of it as there are no small detachable pieces. However, after a few days, the child falls seriously ill due to poisoning. After assisted investigation, the parents discovered it was due to the specific toy. The parents will sue the company for compensation and medical costs

Many real toy injury cases have led to devastating illnesses and injuries to kids. The companies do not predict these possibilities or expect their product to be dangerous. In such cases, it is important to recall products as soon as possible and provide the appropriate compensation. 

Health Industry

The health industry involves any company manufacturing or selling medicine or medical products. Customers trust these companies when buying the medicine meant to treat them. But in some cases, it does the opposite.

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Medicine product defects can occur due to poor manufacturing, contamination, toxic chemicals, failure to warn or misleading descriptions. Customers can quickly fall ill due to the defect and then take action against the responsible firm.

For example, there have been lawsuits against Eisai Inc. due to their Belviq medicine. 7% of Belviq users began to develop pancreatic, colorectal and lung cancer. The lawsuits stated the company failed to warn about the risks and possibly used toxic chemicals.

There have been many medical product cases that have resulted in severe product defect claims. For instance, famous health companies such as Pfizer, Johnson & Johnson, and Amgen have all faced product defect lawsuits. Every company in the industry must be aware of the possible defects that may occur.

Why Insurance Is Crucial for Product Defects?

Both product liability and product recall insurance are crucial for any product business. Each insurance covers a different part of the product defect process. Product liability covers the legal and compensation side, while product recall covers the costs related to the recall process.

Product defects could occur in any product, no matter how safe the companies are. The right insurance can save a company millions and is the best financial protection. Businesses should purchase before the products reach the market and its consumers.

Also, many product defect claims are accidents that firms can’t avoid; companies should not focus on unpredictable defects over creating the best product. Thankfully, having insurance provides that peace of mind, allowing companies to continue their job without stressing every second.

Insurance can save a company in the worst product defect situations as long as the defect is an accident.



To Learn More about product insurance and protect your business from product defect claims in Hong Kong & Asia, contact Red Asia Insurance.