Importing goods from foreign countries, particularly China, has become a common practice for businesses looking to offer competitive products in the US market. However, one significant challenge that arises when importing goods is obtaining product liability insurance. This article explores the difficulties and added expenses associated with securing such insurance and offers potential solutions.
1. Manufacturers Overseas Often Lack Liability Insurance:
One primary reason why it's challenging to find product liability insurance for imported goods is that manufacturers overseas often do not carry this type of coverage or have inadequate coverage. Even if they do have liability insurance, collecting on their policies can be extremely difficult due to limitations like claims occurring outside their home country.
2. Importance of Subrogation:
For wholesale distributors importing products, it becomes crucial for their own insurers to know that if a product liability claim arises, they can subrogate or pursue reimbursement from the manufacturer responsible for any payout on the claim. The logic behind this approach lies in holding manufacturers accountable since they are ultimately responsible for faulty products causing injuries or damages.
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3. Collectible Insurance Concerns with Chinese Manufacturing Facilities:
When merchandise is manufactured in countries like China or other Far East nations lacking collectible insurance options, obtaining suitable coverage becomes both arduous and expensive for distributors based in the US. This scenario contrasts with distributing products made in American manufacturing facilities where insurers are more confident about subrogating claims against domestic manufacturers.
4. Quality Control Issues:
Another factor impacting the availability and affordability of product liability insurance on imported goods is insufficient quality control over these products from overseas manufacturers. Despite importers having quality control departments overseeing production processes, many insurers remain uncomfortable due to historical incidents involving low-quality components, harmful substances used during manufacturing operations, or overall laxity towards quality control standards by foreign manufacturers.
5. Accessing Excess & Surplus Market Insurers:
While prominent brand-name insurance companies may be reluctant to provide product liability coverage on goods imported from China and other countries, there is an alternative marketplace known as the excess and surplus market. Insurers in this sector specialize in writing difficult policies, including those for imported products. Although slightly more expensive than domestic options, accessing these insurers becomes a necessary cost of doing business for importers.
6. The Role of Cargo Insurance:
When importing goods, it's essential to consider insuring them throughout their journey from the manufacturer to your distribution centers. Whether shipped by ocean or air cargo, protecting against potential losses during transportation is crucial. Specialized cargo insurance providers excel at covering such risks and can assist businesses with securing comprehensive coverage tailored to their specific needs.
Securing product liability insurance for businesses importing goods from China presents numerous challenges due to issues like manufacturers lacking adequate liability coverage overseas and concerns regarding quality control standards. However, through the excess and surplus market and specialized cargo insurance providers, viable solutions exist that allow importers to protect themselves financially while navigating these hurdles effectively.
If you're facing difficulties obtaining product liability insurance or require assistance with other insurance matters related to imports, speak to BimaKavach experts.