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Product Liability: Are You Covered?

By Patty Schmucker
Posted: May 23, 2008, from the July 2007 issue of Skin Inc. magazine.

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If you are only a seller in the supply chain or purchase private label products without changing the formula in any way, the protection under your business insurance should be adequate. However, you should always review this with your carrier in order to be sure.

If you want greater protection or are buying contract-manufactured products, separate insurance is necessary. The common industry practice calls for liability insurance of $1 million per incident. Cost for this type of insurance will vary depending on the location of your business, the uniqueness of your product formula and the category of products you are selling. For example, a cleansing cream will be less expensive to insure than a product with hydroquinone.

Knowing the law

The second factor influencing your level of legal exposure is the location of your business.

In the United States, the claims most commonly associated with product liability are negligence, strict liability, breach of warranty and various consumer protection claims,” reports Sharon Blinkoff, attorney at law. Blinkoff serves on the board for ICMAD and has been practicing law in the professional beauty industry for 30 years.

While the FDA has very specific guidelines for labeling products that must be followed nationwide, the majority of product liability laws are determined at the state level and vary widely from state to state,” explains Blinkoff.