Business Insurance  /  Product Liability

Commercial Coverage

Product Liability Insurance
— When Your Product Causes
Harm After It Leaves Your Hands.

If your business makes, sells, distributes, or supplies a product — and that product injures someone or damages their property — you can be held liable. Product liability is the coverage that protects you from those claims, regardless of where in the supply chain you sit.

What Product Liability Insurance Covers

Coverage for claims that a product you made, sold, or supplied caused bodily injury or property damage.

Product liability insurance covers your business when a third party claims that a product associated with your business caused them bodily injury or property damage. It applies after the product has left your hands — when it’s in the customer’s possession, being used as intended, or distributed further down the supply chain.

Product liability exposure isn’t limited to manufacturers. Any business in the product supply chain — retailers, distributors, wholesalers, importers, and businesses that repackage or label products — can face a product liability claim. In Texas and under federal law, parties throughout the supply chain can share liability for a defective product even if they didn’t manufacture it. If your business name is on it, or if you sold it, you can be named in a claim.

Product liability coverage is typically included in a standard general liability policy — but the limits, coverage terms, and exclusions vary. For businesses with significant product exposure, a standalone product liability policy or specific endorsements may provide more appropriate coverage than the product liability portion of a basic GL.

“You don’t have to manufacture a product to be liable for it. If your business sold it, distributed it, branded it, or imported it — and someone is harmed by it — you can be named in that claim. Product liability covers your position in the chain.”

Product liability claims can surface long after a product is sold. A product that causes harm months or years after purchase is still a product liability claim. This is one reason adequate limits — not just the presence of coverage — matters for businesses with meaningful product exposure.

What product liability covers:

✓
Bodily injury from a defective product
Injuries to a customer, user, or third party caused by a product defective in design, manufacture, or labeling
✓
Property damage caused by a product
Damage to a customer’s property caused by a product failure — a defective appliance, a chemical spill, a component that fails during use
✓
Legal defense costs
Attorney fees, expert witness costs, and court costs to defend a covered product liability claim — including unfounded claims
✓
Settlements and judgments
Covered damages awarded to the claimant or negotiated in settlement, up to the policy limit
✓
Retailer and distributor liability
Coverage for businesses that sell or distribute products manufactured by others — your position in the supply chain creates exposure even without manufacturing involvement
✓
Recall-related costs (where endorsed)
Some policies cover costs associated with product recalls — notification, retrieval, and replacement — when a defect creates a risk of harm

Three Types of Product Liability Claims

A product liability claim can arise from a defect in design, manufacturing, or labeling — here’s how each one works.

Understanding the three types of product liability claims helps you see how broad the exposure actually is — and why it applies to businesses beyond just manufacturers.

Design Defect

A design defect claim alleges that the product’s design itself is inherently dangerous — that even a perfectly manufactured version of the product is unreasonably unsafe. The defect exists in the blueprint, not the production. Every unit of a product with a design defect is potentially defective. These claims are typically the broadest in scope and can affect every unit ever sold, not just a specific batch.

Manufacturing Defect

A manufacturing defect claim alleges that the product’s design was sound but something went wrong during production — the wrong material was used, a component was assembled incorrectly, or quality control failed to catch a problem. Only specific units or batches are affected. The injured party must show that their specific product deviated from the intended design in a way that caused harm.

Failure to Warn (Labeling Defect)

A failure to warn claim alleges that the product was potentially dangerous in ways the user wasn’t adequately informed about — missing warnings, unclear instructions, or inadequate safety information. A product that is inherently safe when used correctly can generate a labeling defect claim if its hazards weren’t communicated clearly. Businesses that relabel, repackage, or import products have specific exposure here if the labeling isn’t adequate under U.S. standards.

GL vs. Product Liability — Understanding the Distinction

Product liability is part of GL — but for businesses with real product exposure, the details matter.

Standard GL policies include product liability coverage — but it’s worth understanding exactly what that means and where the limits of that coverage lie.

General Liability — Operations Coverage

Covers incidents during your business operations

The operations portion of GL covers bodily injury and property damage that occurs while your business is actively doing something — a worker damages a client’s property, a customer slips on your premises during business hours. The harm happens during the operation.

Example: A retail store employee accidentally knocks over a display, injuring a customer. Operations coverage under GL responds to the customer’s injury claim.
General Liability — Products Coverage

Covers claims arising from products after they leave your business

The products and completed operations portion of GL covers bodily injury and property damage caused by a product you sold, manufactured, or distributed — after it’s left your possession. This is product liability coverage. The key question is whether adequate limits and appropriate coverage terms are in place for the actual product exposure your business carries.

Example: A customer purchases a product from that same retail store. At home, the product fails and causes a fire. The products coverage portion of GL responds to the resulting property damage and injury claim.

When standalone product liability matters: For businesses where products are the primary source of revenue and risk — manufacturers, importers, food producers, chemical suppliers — a standalone product liability policy or significantly higher limits on the products portion of GL is often warranted. The standard GL products sub-limit may not reflect the real scale of your product exposure. We review this when building programs for product-focused businesses.

Who Needs Product Liability Coverage

Any business in the supply chain of a physical product — not just manufacturers.

Product liability exposure exists at every point in the supply chain. You don’t need to manufacture a product to be named in a product liability claim. These are the businesses where the exposure is most significant.

Manufacturers

Primary exposure — design defects, manufacturing defects, and labeling failures all sit with the manufacturer. Every product sold carries potential long-tail liability.

Retailers & Distributors

Selling a defective product exposes retailers and distributors to claims even though they didn’t manufacture it. Texas law allows injured parties to pursue all parties in the supply chain.

Importers

Businesses that import products from foreign manufacturers assume significant product liability exposure — if the foreign manufacturer is unreachable, the importer often bears the full claim.

Food & Beverage Businesses

Restaurants, caterers, food producers, and beverage companies face product liability exposure from contamination, mislabeling, allergen failures, and foreign objects in food.

Chemical & Pesticide Suppliers

Businesses that supply, distribute, or apply chemical products — including landscaping and pool service companies — face product liability exposure for the chemicals they use and sell.

Contractors Installing Products

Contractors who supply and install products — HVAC systems, roofing materials, pool equipment — may face product liability claims if an installed product fails and causes harm after the job is complete.

Private Label & Custom Products

Businesses that put their brand on products made by others assume manufacturer-level product liability. If your name is on it, you’re liable for it — regardless of who actually made it.

E-Commerce & Online Sellers

Online retailers selling third-party products face increasing product liability exposure as courts have expanded liability for marketplace sellers. If you sell it — even on a third-party platform — you may face a claim for it.

Real Scenarios.

What product liability claims look like — across different industries and supply chain positions.

01
A food product causes illness in multiple customers
A restaurant or food producer sells a product that is later found to be contaminated. Multiple customers become ill and pursue claims. Food product liability claims can be extensive — multiple claimants, significant medical costs, and potential regulatory consequences from health authority investigations. Product liability covers the defense and damages for bodily injury claims arising from a contaminated food product.

03
A chemical product causes property damage during use
A landscaping company applies a herbicide that damages a client’s ornamental plants beyond the intended treatment area. The product was applied correctly, but the labeling didn’t adequately warn about wind drift at certain temperatures. The landscaping company, as the supplier and applicator of the product, faces a product liability claim for the labeling defect — property damage covered by the policy.

05
A private-label product injures a consumer
A business that has a product manufactured under their brand name sells it through retail and direct channels. A design flaw causes injury to a consumer. Because the business’s name is on the product, they face full manufacturer-level product liability. The contract manufacturing agreement may provide some indemnification, but the business’s own product liability policy is the primary response to the consumer’s claim.

02
A retailer sells a defective product that injures a customer
A hardware store sells a power tool that fails during normal use, injuring the purchaser. The manufacturer is a foreign company with no U.S. presence. The injured customer names the retailer in their product liability claim. The retailer didn’t manufacture the tool — but as the seller, they’re a named party in the supply chain with direct liability under Texas law. Product liability coverage responds to the retailer’s defense costs and any resulting damages.

04
A pool equipment product fails and causes a chemical exposure
A pool service company installs a chemical dosing system. The system malfunctions and overdoses a pool with chlorine, causing respiratory injury to a swimmer. The pool contractor supplied and installed the equipment. A product liability claim against the contractor as the supplier of the defective equipment — separate from any installation workmanship claim — can result in significant damages. Product liability covers the supply chain exposure; GL completed operations covers the installation.

06
An HVAC unit installed by a contractor fails and causes a fire
An HVAC contractor supplies and installs a condensing unit. The unit fails due to a manufacturing defect and causes a fire in the mechanical room. The contractor faces claims on two fronts: a completed operations GL claim for their installation work, and a product liability claim for their role in supplying the defective unit. Both coverages are needed — and the product liability exposure exists regardless of whether the installation was performed correctly.

Why Get Your Product Liability Coverage Through McKnight

Product liability coverage is in most GL policies — but the limits and terms may not match your actual exposure.

Standard GL policies include products and completed operations coverage — but the limits are set for a general business, not for a business where products are the primary source of revenue and risk. A restaurant, a chemical supplier, a contractor who regularly supplies and installs equipment, or an importer of foreign-made goods has a meaningfully different product exposure than the GL default assumes.

We review your product exposure specifically when building your program — what you make, sell, distribute, or install, what the realistic scope of a product claim against your business could look like, and whether the products coverage limits in your GL are adequate or whether standalone coverage or higher limits are warranted. For businesses with private-label products, we also review how your contract manufacturing agreement allocates liability and whether your policy structure reflects that allocation.

As an independent agency across 100+ carriers, we find carriers with specific appetite for your product type and industry — which matters because product liability underwriting varies significantly by product category, claims history, and distribution channel.

Product exposure reviewed specifically
We look at what you make, sell, or supply — and whether your current GL limits reflect that exposure or fall short.

One account manager for your full program
Product liability sits alongside your GL, property, and other coverages — one person sees the complete picture.

100+ carriers — product-specific markets
Product liability underwriting varies significantly by product type. We find carriers with appetite for your specific category.

Real answers when you call
817.277.6166, weekdays 8:30–5pm. A product claim in progress or questions about your coverage — we pick up.

FAQ

Product liability questions we hear all the time.

What is product liability insurance and who needs it?
Product liability insurance covers your business when a product you made, sold, distributed, or supplied causes bodily injury or property damage to a third party. It applies after the product has left your possession. Any business in the supply chain of a physical product has product liability exposure — not just manufacturers. Retailers, distributors, importers, businesses that private-label products, and contractors who supply and install products all carry product liability exposure and need coverage that addresses it.
Is product liability already included in my GL policy?
Yes — standard GL policies include products and completed operations coverage, which is the product liability component. The question is whether the limits and coverage terms match your actual product exposure. For businesses where products are the primary source of revenue and risk — manufacturers, food producers, importers, chemical suppliers — a standalone product liability policy or significantly higher products coverage limits may be warranted. We review whether the products coverage in your existing GL is adequate or whether the structure needs to change.
Can I be held liable for a product I didn’t manufacture?
Yes — Texas law allows injured parties to pursue any business in the supply chain of a defective product. A retailer who sold it, a distributor who moved it, or an importer who brought it into the country can all be named in a product liability claim even if they had no involvement in the product’s design or manufacture. If the manufacturer is a foreign company with no U.S. presence, the domestic importer often absorbs the full claim. Product liability coverage protects your position in the chain regardless of where in it you sit.
What’s the difference between product liability and completed operations coverage?
Both cover claims that arise after a product or project leaves your hands — and both are typically included under the products and completed operations coverage in a GL policy. The distinction is the source of the claim. Product liability applies when the harm is caused by a defective product itself — a manufacturing flaw, a design problem, inadequate warnings. Completed operations applies when the harm is caused by faulty workmanship in a job you performed — a plumber’s installation leaks, a roofer’s work fails. For businesses that both supply products and perform installation work, both exposures are present and both need adequate coverage.
I put my brand name on products made by a contract manufacturer — do I have product liability exposure?
Yes — significant exposure. When your brand name is on a product, you’re treated as the manufacturer from a liability standpoint regardless of who actually made it. A consumer injured by the product can pursue you directly. Your contract manufacturing agreement may include indemnification provisions that require the manufacturer to cover claims — but in practice, those provisions are only as valuable as your manufacturer’s insurance and financial strength. Your own product liability coverage is the primary protection for your brand’s exposure.
Does product liability cover recall costs?
Standard product liability coverage — including the products coverage in a GL policy — covers bodily injury and property damage claims from a defective product. Recall costs themselves — the expense of notifying customers, retrieving products, and replacing them — are typically not covered under a standard policy. Product recall coverage is a separate endorsement or policy. For businesses that manufacture or import products where a recall could be necessary, this is worth specifically addressing. We discuss it when building programs for product-focused businesses.
How much product liability coverage do I need?
It depends on what you make or sell, the volume of product you put into the market, and the realistic scope of harm a product failure could cause. A food producer with wide distribution, an importer of power tools, or a chemical supplier has very different product exposure than a local retailer selling low-hazard goods. Many retailers and distributors operate adequately with GL products limits of $1M to $2M. Manufacturers, importers, and food producers often need higher limits or standalone coverage. We assess your specific product exposure and recommend limits based on the realistic worst-case claim your products could generate.

Get Started

Let’s make sure your product exposure is covered — at limits that reflect the real risk.

Call us or request a quote. We’ll review what you make, sell, or supply, assess your product liability exposure, and make sure your coverage structure matches it.

McKnight Insurance Services  ·  Mansfield, TX  ·  Weekdays 8:30am–5pm