Exporting to the United States – A Team Canada Inc Publication

4.11 Product liability litigation

In both the U.S. and Canada, individuals and groups can sue businesses on the grounds that the business's product or service was faulty and that this fault caused harm to the plaintiff(s). Product liability lawsuits are much more common in the U.S. than in Canada, and the result has been a huge escalation in the cost of product liability insurance (PLI) in the U.S. In fact, because of the costs of these lawsuits to the insurance companies, many have stopped offering PLI at all.

Carrying PLI for your U.S. operations isn't legally mandatory. However, potential intermediaries or buyers may refuse to purchase your exports unless you obtain such coverage, because this will help protect them from litigation if your product or service is alleged to be faulty.

As well as being difficult to get, PLI can be very costly. For example, it's estimated that the PLI needed to cover a football helmet is greater than the cost of making the helmet itself. Therefore, before you settle on a final export price for your product, be sure to find out whether you need PLI and how much it will cost. Insurance-Canada.ca's product liability Web page has more information on this difficult problem.