Are the Products I Use Covered by my Product Liability Insurance?

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When looking for massage therapy insurance, hair stylist insurance, nail tech insurance, or esthetician insurance you need to understand how the use of various products may impact your business. Those in the beauty and health industry use, apply and sell products on and to their clients. These products used or sold as part of your services can cause harm to an individual. The question is would the products you use, or sell, as part of your services be covered under your product liability insurance? It depends.

The reason the answer is “it depends” is because there are variables needing to be considered if an injury occurred due to the products you are using or selling. Some of the variables are:

  • What coverages are provided by your general and product liability policy?
  • Whose product are you using?
  • Was the product that caused the injury used during your service or treatment?
  • Was the injury caused by a product you sold?

We will explore these topics with the hope that they will bring a greater understanding of the exposures you have, and the coverages needed to protect your business.

Difference Between General Liability and Product Liability Insurance

Most general liability policies respond to bodily injury and property damage claims, which you become legally obligated to pay, arising from your business operations; premises liability, completed operations, personal and advertising injury, and damage to rented premises. In most Commercial General Liability (CGL) policies, product liability coverage is provided.

If you are unsure if your CGL policy includes product liability insurance, you can look at the declaration page of your policy. The declaration page is one of the first pages of your policy that summarizes the liability insurance coverages provided to you.  If it includes product liability coverage, your policy limits would look something like this:

General Aggregate Limit

$2,000,000

Products/Completed Operations Aggregate Limit

$2,000,000

Each Occurrence Limit     

$1,000,000

Personal And Advertising Injury Aggregate Limit

$1,000,000

Damage To Premises Rented to You Limit

$1,000,000

Medical Expenses Limit

*Limits may vary by policy

$5,000

If there is a limit shown in the “Products/Completed Operations” section, you most likely have product liability coverage. You can see this indication on our coverage details page. If “Products” is not listed or the limit is replaced with the word “excluded” you probably won’t have product liability coverage.

young woman getting hair styling consult

Products Only Policy

Products Only, or product-specific, policies are designed to respond to bodily injury and property damage claims arising from the use of your products. The product liability-only policy will not cover any operational claims that occur like the Commercial General Liability policy.  For example, a slip-and-fall on your premises.  Unless the slip-and-fall was caused by your product it would not be covered.

Many products-only policies may not have restrictions on the products you sell but it is very common for a product-only liability policy to provide coverage to only specific products listed on the policy. If this is the case, you are required to provide a list of products you want to be covered by the insurance company and have them listed on the policy. If it’s not listed, it’s not covered.

For example, if you have a product liability policy listing lotion, essential oils, and scrubs the policy would only respond to claims arising from these specifically listed products. So, if you had a claim arise from a bath bomb, which is not listed on the policy, there would be no coverage.

 

Keep Insured Product List Up to Date

This type of product liability policy can be problematic as you add products during the year and forget to report them to the insurance company. If you have a product liability policy with this restriction it is important to review your “insured product” list and make sure it’s up to date.

Looking at a products-only policy declaration page you would see something like this:

General Aggregate Limit (Other than Products/Completed Ops)

EXCLUDED

Products/Completed Operations Aggregate Limit

$2,000,000

Each Occurrence Limit     

$1,000,000

Personal And Advertising Injury Aggregate Limit

EXCLUDED

Damage To Premises Rented to You Limit

EXCLUDED

Medical Expenses Limit

*Limits may vary by policy

EXCLUDED

In comparing the CGL policy limits and the product-only limits you can see that the products-only policy limits the coverage and is more restrictive than the CGL policy. 

When available, we strongly suggest purchasing a Commercial General Liability (CGL) policy – including product liability – over a product liability policy only. This will provide your business with a policy offering broader coverages to protect your business.

cosmetologist applying makeup to models face

Whose Product Is It?

When it comes to liability, especially product liability, it is important to understand who will be responsible for the injury sustained from the product. In our litigious society, anyone in the supply chain that handled the product causing the injury could – or will – be named in a lawsuit. Depending on where you are in that supply chain could determine your legal liability for the damages caused by the product. 

For example, if you purchase a product to be used in your services and do nothing to modify the product, then the product liability will usually fall on the manufacturer of the product.  You may be named in a lawsuit, but the liability usually will fall on the manufacturer and the manufacturer may have specific coverage to protect the vendor from damages caused by their product. This coverage is provided through the “Additional Insured – Vendors” (CG2015) endorsement on the manufacturer’s policy.

Limitations to Additional Insured Vendors

However, there are limitations to the “Additional Insured – Vendors” coverage which include:

  • Any physical or chemical change intentionally made to a product by a vendor will void coverage
  • Any repackaging of a product will void coverage, except when it is repackaged solely for the purpose of inspection, demonstration, testing, or the substitution of parts under instructions from you, and then repackaged in the original container
  • Coverage is voided if the vendor (or another party on the vendor’s behalf), after receiving the products, has labeled, or relabeled it or used it as a container, part, or ingredient for any other thing or substance

 

If you purchase a product and add anything, repackage, relabel, or add to another product there may be no coverage offered from the manufacturer. By doing any of the previously mentioned acts the product now becomes your product and you will be held liable for damages.

If you import products, you become the “manufacturer” of that product. If you take two components and mix them, you become the manufacturer. Even something as simple as adding essential oils to your massage oil makes you the manufacturer.  Simply put, you are going to be responsible for suits and claims that arise from the products you have “manufactured” and increase the product liability exposure to your business.

You may be thinking, “but I have a CGL policy including product liability so my insurance will protect me”. Maybe.  It will depend on the policy coverages and how extensive your product liability coverage is. Although product liability may be included in your CGL policy many policies will contain an exclusion for any products other than those used as part of your business operations during the course of your service.

This means that if you manufacture, mix, or produce your own product to use on your clients during your services your product liability policy would respond if an injury occurred from that product. But if you sold that product to the public and a claim occurred the policy would not respond. 

Understanding Product Liability Exposures

Whenever you are looking for massage therapist insurance, cosmetologist insurance, nail tech insurance, esthetician insurance – or any other health and beauty service insurance coverage – it is important to understand the product liability exposures you have when you are purchasing, mixing, importing, or manufacturing a product. It is equally important to know the limitations of your general and product liability insurance and how it would respond to your business operations.  Not knowing could financially cripple you and your business.

Median And Average Personal Injury Jury Awards By Type Of Liability, 2020 graph

Source: https://www.iii.org/fact-statistic/facts-statistics-product-liability

If you are considering changes in your operations or pivoting your business in a different direction, consult with an insurance professional to understand your exposures and how to cover them. Beauty & Bodywork Insurance has partnered with Insurance Canopy to assist with additional coverage options as your business grows.

If you have any questions about your insurance coverage, please reach out to our customer service team at 877.536.7290.

Disclaimer: All policies have specific coverages, limitations, conditions, and exclusions.  Please refer to your policy for exact coverages and policy verbiage.

Author: Chris Van Leeuwen

Chris Van Leeuwen has been in the insurance industry since 1987. Chris obtained his Certified Insurance Counselor (CIC) designation in 1996 and is an approved continuing education instructor in Utah. Chris is the Vice President of Agency Development which includes education, training, and managing carrier relationships.

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