For businesses that produce products for either individual consumers or other companies, product liability is one of the biggest risks of doing business. The possibility is always there for something to go wrong with your products. If people get hurt or suffer property damage losses, they may bring a lawsuit against your company.
You probably carry specialized product liability insurance for your company that can pay for any valid claims made by people who have used your products and experienced some kind of product failure. Sometimes, a failure only occurs because of something wrong with an individual product. Other times, you may realize after delivering thousands of individual units to retailers that entire production batches have issues with them or that there is something wrong with the design of the product.
A product recall could potentially help your company minimize liability for those defective products.
How a recall helps
When a manufacturer recognizes that there is a safety issue with a product and initiates a voluntary recall, they can prevent the sale of additional defective units, which can in turn prevent people from getting hurt.
Recalls can also convince people who already own the defective product to bring it back to the retailer for replacement or a refund. Other times, you may be able to arrange to repair the defective products, thereby limiting your company’s losses because of the recall.
Provided that you follow the proper steps for initiating the recall and prioritize resolving safety issues as quickly as possible, a recall can potentially help minimize how much liability your organization has for the defective products. If consumers know about the recall and fail to take the appropriate steps, they will have a harder time bringing a claim against your business later.
Recalls conducted voluntarily and in good faith also help establish that your business wants to protect the public, which can help during a lawsuit brought by consumers against a business. Recalls will only partially mitigate a business’s liability for a defective product, but they can be an important part of the organization’s overall response to the issue. Exploring all of the ways to reduce your company’s product liability can help protect it from expensive insurance claims and potential litigation.