When I talk to retailers about insurance needs, they often say, “Why should I buy liability insurance? If somebody is injured by a product that I sold, it will be the fault of either the contract manufacturer or the raw materials supplier, not me. I only put it on the shelf and sell it. I don’t have any liability for that.”
The fact of the matter is that plaintiffs’ lawyers will sue everybody in the chain of commerce with equal vigor, including the retailer. Lawyers are seeking money for their clients and will engage as many parties as possible, regardless of whether they had anything to do with the actual injury. Lawyers will sue the bottle manufacturer, the label printer, even the company that provided the silica pack in the bottle. The retailer, having sold the product to the consumer, is actually in center spotlight.
This is why liability insurance is a good investment. It covers risks that pose uninsured supplement retailers the greatest harm to their business. A major, often unappreciated feature of the policy is the payment of attorney fees and related costs of litigation. For supplements, the allegations most often involve bodily injury or death, and the cost to defend these lawsuits can be substantial.
Generally, plaintiffs’ lawyers will be somewhat intimidated at the prospect of having to battle the “big bad insurance company” with deep pockets to fund a vigorous defense. Conversely, being uninsured and having to fend for yourself will be expensive, and may make the plaintiffs’ lawyers more aggressive in their attempt to extract money directly from you to settle the claim.
Since the year 2000, the dietary supplement industry has been a cause of increasing concern for insurance companies. Liability rates have soared for everyone involved in the process—raw materials suppliers, contract manufacturers, wholesale distributors and retailers. Fortunately, premiums for liability insurance peaked about 18 months ago and are currently declining, but they still take a sizeable bite out of the bottom line.
The key to getting the best liability insurance is to select the right broker to procure proposals from the handful of insurers willing to sell it to the dietary supplement industry. An insurance broker who specializes in the dietary supplement industry is the best choice. A broker with just one or two clients in the industry probably won’t be on top of industry issues and the specifics needed to assemble an underwriting package for your company that underwriters will find informative, thereby resulting in a lower premium.
In addition to buying liability insurance, what can a dietary supplement company or retailer do to protect itself from lawsuits in general, whether or not that lawsuit is covered by insurance?
First, get a good attorney. Finding a good attorney who is familiar with the industry and, preferably, has actually defended dietary supplement industry companies in front of a jury will be worth its weight in gold. Such an attorney will come to you knowing the plaintiffs’ lawyers’ “end game” and will be able to advise you on numerous strategies to defend your company. Ideally, the lawyer should be versed in federal regulatory issues, labeling issues, etc. Retaining a competent attorney before a lawsuit is an investment that might someday prevent a major disruption and cost to your business.