Expanding to the U.S.: Key Product Liability and Insurance Considerations

Table of Contents

1. Navigating Expansion: Understanding Liability Risks in the U.S. Market
2. Understanding Higher Product Liability Awards and Punitive Damages in the U.S.
3. Navigating Increased Liability Risks and State-Specific Regulations
4. Action Steps

Navigating Expansion: Understanding Liability Risks in the U.S. Market

You run a thriving manufacturing business in Canada and now plan to seize the opportunity to expand into the larger U.S. market. This move holds significant promise for growth and increased revenue, but it also introduces a range of potential risks and challenges. The U.S. market differs in many ways from the Canadian market, particularly in terms of product liability and risk management. As you prepare to navigate this new territory, it is essential to understand and address these key considerations:

Understanding Higher Product Liability Awards and Punitive Damages in the U.S.

While expansion promises growth, recognize that product liability negligence awards in the U.S. often surpass those in Canada, especially for pain and suffering damages. In Canada, general damages for pain and suffering are capped at around $400,000. In contrast, U.S. awards can reach $10,000,000 or more without a cap, potentially exceeding policy limits. U.S. courts may also impose punitive damages—extra penalties aimed at punishing defendants for particularly harmful behavior. These damages can exceed the compensatory damages intended to reimburse victims and may not receive coverage from insurance policies, depending on the court’s jurisdiction and policy terms.

In the U.S., cases are frequently decided by juries, who may be more sympathetic to plaintiffs, potentially leading to higher damage awards compared to judge-only trials in Canada. Understanding this landscape is essential to mitigate potential risks.

Navigating Increased Liability Risks and State-Specific Regulations

If your product is used by employees, especially in manufacturing settings, you face greater potential liability risks in the U.S. compared to Canada. In Canada, government-operated workplace injury boards handle most worker injury claims. In contrast, U.S. private insurance companies manage these claims and are more likely to pursue damages from negligent manufacturers whose products injure workers.

Additionally, manufacturers need to navigate varying laws and regulations across U.S. states, as these differences can significantly impact your product liability exposure. Legal exposures may range from:

• Tort: Negligent design, negligent manufacture, negligent misrepresentation, failure to warn, improper labelling.
• Economic Loss: Breach of contract, breach of warranty, breach of a condition.
• Strict Liability: Liability imposed by local legislation, statutory restrictions, Consumer Product Safety Commission obligations.

Each U.S. state has its own set of laws and regulations affecting product liability. It’s essential to research and comply with these varying laws to minimize legal liability risks. Failure to do so can expose your business to lawsuits and penalties that could have been avoided with proper due diligence.

Canadian manufacturers should also be aware that their liability insurance limits are set in Canadian dollars. If a product liability claim arises in the U.S., the award will be in U.S. dollars. Fluctuations in the exchange rate could make your Canadian policy limits effectively lower in the U.S.

Action Steps

Expanding into the U.S. not only presents growth opportunities but also introduces several risks. To navigate this transition effectively, consider the following key factors:

• Higher product liability awards
• Potential punitive damages
• Impacts of jury trials
• State-specific regulations
• Currency fluctuations
• Policy coverage and exclusions

To protect your business, seek advice from a broker who can recommend coverage specific to your industry. For instance, consider options like Unica’s Manufacturers Connection™. This comprehensive insurance solution not only bundles commercial property, general liability, business interruption, and crime insurance at a competitive price, but also provides essential support. Ultimately, this tailored coverage is designed to help you navigate the complexities of expanding into new markets while safeguarding your assets.

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