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Questions on business liablility insurance (14)

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Where does one need a business liability insurance? I am told supplements and selling clothing products (including print on demand) need one. How true is it? How risky is it without going one? Am I not safe with an Indian business registratation selling in the US anyways?
What are the costs associated with buying an insurance?
Who are the best providers?

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This a country-based question:
- Is the concept of liability defined in your country?
- How enforcable is the law / a contract in your juridiction?
- Is there a law suit culture where anyone can sue with limited cost
- Is there a culture of insuring this risk? If not, you won't find any insurance providing solutions for that
- If your decide to go bankrupt, can they sue you personally or will this be limited to your business?

US has a strong law system with enforceable contracts and the probabily of someone to sue you is far from zero. That is why they have liability insurance policies, and even excess liability insurance policies
This said, these products may not exist in India, or can be cost prohibitive because there is no re-insurance market.

To give you an idea, I had the case where I was organizing a party in Chile a building owned by France. After we had sold all tickets, one of their accountants came back with a new policy requiring us to get an event-based liability insurance, while this concept does not exist in Chile. I was quoted more than 1000 USD to insure a 3-hour cocktail, with the insurance not covering the first USD 15,000, while an insurance in France would have quoted us 40-50 USD with full coverage. I looked at the cost, the risk, and then took a decision.

This is a question you have to ask to a lawyer familiar with both countries AND with experience in the industry you are in. He will give you pros and crons, and then you will be able to take a decision.

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@jeremie thanks for sharing your insights. I was just wondering if anyone can get hold of me as far as India if I sell a U.S. manufactured supplement in the US that meets all the compliance and regulations in that country. The manufacturer will be surely held liable if anything goes wrong, but that does not stop anyone for hold me accountable for marketing the product ( under my own private label and NOT as an affiliate).

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Wow, @wisdompower you considering a nutra play?

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So, I don't specialize in business insurance, as you can image it is quite complex. Nor am I an attorney, so take this as very high level.

If you are the retailer, you probably have product liability. https://www.mouratovalawfirm.com/bus...duct-liability Is an affiliate the retailer? Maybe, maybe not. Is someone private labeling a retailer, probably.

Product liability insurance is widely available in the US, so it would be fairly easy for a US based entity to get. However, it sounds like you are in India which complicates things.

Being in India, it would complicate a judgement against you. However, you are also quite unlikely to show, so a default judgement is almost a given if a court rules someone has standing against you. Should someone get a judgement against you, you should expect to lose any and all US assets, primarily money in accounts and any inventory you have. You would know better if India and Indian courts will enforce a US judgement against an individual or business.

As to the odds of getting sued, it really just depends. That said, lawyers go after deep pockets. There is little point in getting a massive judgement if you can't collect on it. You may or may not be the deep pocket in such a situation. However, you may have to be named to go after the deep pocket to establish a chain from purchase to manufacture or wherever the deep pockets exist. They also like to name anyone they can, to see if they do have deep pockets or to get them to flip on the party who does.

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Man, I never thought I'd see those words again. Liability insurance. And a bunch of other random insurances.

It's mostly a US thing.

The last time I had to deal with it when I was helping a company in Japan use the license for a big brand in the US. The US bid brand demanded that the Japanese company had liability insurance, which as @jeremie said, is super common and is $50 cheap or something in the states.

However, this specific insurance does not exist in Japan (which is funny, since they have fucking insurance for fucking everything there, including elementary school supply insurance). After researching and talking to insurance companies in Japan, who said it doesn't exist, and the US, who said they can't cover a Japanese business, I called up the big brand in the US and explained the situation.

They said, 'OK, you don't need liability insurance then, nm.' And the project moved forward.

Obviously, different for running US nutra or whatever from India. But I imagine you are way overthinking it at this stage. No one gives a shit about some random affiliate in India selling a couple hundred dollars of white label diet pills.

Break stuff first, then fix as you go.

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Let's be clear, about all event liability and product liability have in common is the word liability. Event liability is so cheap that no one will sell it unless you are already a client or you get it from some website where no one deals with you. Product liability is based upon gross receipts and will depend upon exactly what is being sold.

https://howmuch.net/costs/product-liability-insurance

This link does bring up an interesting point. See if the manufacturer can add you to their policy. Depending upon the policy, it is not uncommon to have additional insureds.

Were it me, I would limit my exposure in the US, get my money out as quickly as possible. I would also research how often Indian courts will enforce a US judgement. You may well be effectively judgement-proof if there is nothing in the US to seize and Indian courts ignore attempts to enforce a US judgement.

While I would never tell someone to ignore a liability concern, I do agree this wouldn't keep me up at nights.

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@jaybot surely I'm overthinking! But someone scared me and of course they are promoting the liability insurances along with their coaching program and offering "no MOQ" white labeling for the supplements. And when I tried to probe they say, " we are not attorneys, but they can just sue anyone involved in the chain!" " I have insurance for my apparel store because they can cause skin irritations."
You have a point, but I need to make some purchases like domain name, etc. so if the insurance is mandatory before I start, I won't waste anymore time or money and brush them aside. However, the profit margins of these products are pretty high, so they seem lucrative. But again cannot use Facebook ads for this either and face an immediate ban.
If my "fears" go, I'll jump in tomorrow and start the campaign immediately.
Then if it's $50 I would rather buy the insurance Most important - I just wanted to have an overview knowledge of how it works without the need of consulting an attorney, who may give way less information.


@iwanttofly Thanks for sharing the link. Helpful indeed! By the way, inside India it's difficult to enforce it's own laws - forget someone filing a court case in the U.S. You can get away with almost everything except murder and consuming/selling banned drugs. And if you have the money/influence you can escape that too with a light punishment or "bail" after a couple of years. The Indian government "summons" and files litigations against Mark Zuckerberg all the time for local election results. The court "summons" may not be reaching his lowest employee's mail box!

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Nutra play? What's that?

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As the guys above mentioned... nobody will sue a small affiliate or company in India from the US, not gonna happen as that makes no financial sense for anyone involved. What I would look at instead of liability insurance, would be the certificates of the products you're about to sell. Have these been tested, are they approved for human consumption, are they safe... things like this.

If you go to a pharmacy and buy a supplement there and get heath problems because of that, you won't try to sue the pharmacy, you will go after the producer. As long as the product was certified and approved, I seriously doubt the pharmacy can get into trouble. The producer would get all the heat and they would have to prove everything went fine during the production etc...

I'd say it would be the same in your case. If you're about to sell tested and certified products, you have nothing to worry about.

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I am selling FDA certified products, but see no harm getting an insurance at a later stage if the sales volume is good. Absolutely no hair oils or skin creams shipped from China. All products sourced locally within the U.S. but with my brand.

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You should be fine then.

And I agree, once the volume is there, it makes sense to get some insurance to stay covered.

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Product Liability isn't $50, not unless you have next to no volume and the safest thing on the planet. The volume may be low, but it definitely won't fall into "safest thing on the planet" category. Further, product liability is an auditable policy, https://www.products-liability-insur...-audit-advice/

So make sure to keep good records and make a realistic projection of sales when you do get a policy. It will save you from a big bill later. You definitely want a good agent for something like this, don't just price shop. There are lots of ways to get a low premium, by fudging projected sales or through a policy with less coverage.

And thank you for letting me know about judgements. I wasn't sure and I didn't want to go sticking my foot in my mouth by assuming.

But again, this isn't something I would lose sleep over at this point. I would give it serious thought once the volume starts to come up and your exposure increases.

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I did a bit of research yesterday and I think a proper one costs around $1800. It will cover the entire business, not just the supplements. But again - it comes later when I get decent sales.

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