What Is Strict Liability In Insurance

Strict liability imposes absolute responsibility on a party for damages, regardless of fault.

It’s commonly used in criminal, corporate, and tort law.

This can occur when a party creates a dangerous situation, making them liable if it leads to damages.

Strict liability in insurance
Strict liability in insurance: Photo source (ablison.com)

For instance, owning a pet wolf results in strict liability, where the owner is held fully responsible for any harm caused, regardless of safety measures taken or others’ actions.

What is the Rule of Strict Liability?

Strict liability holds you or your business accountable for harm caused to others, regardless of fault.

This means compensating for damages like repairs, lost wages, and medical bills.

It lessens the burden of proof when suing for damages.

It’s also known as absolute liability, where fault is assumed.

While seemingly unfair, it ensures restitution for unintentional harm.

Usually, strict liability applies to three areas:

  • Product liability
  • Possession of wild animals
  • Engaging in ultra-hazardous activities

Since product liability most commonly applies to business owners, let’s dive into it.

Product Liability

When a product you develop, manufacture, sell or distribute causes harm or damage to someone else or someone’s property, this is known as product liability.

Typically, the most common lawsuit revolves around product defects. And yes, strict liability is applied here.

So, for example, if your product has a defect that injured a customer, you’re responsible for all damages.

Another example is if your company sells machinery like lawnmowers, snow blowers or other industrial equipment.

Suppose the machinery did not have proper safety features, like automatic guards that keep hands out of dangerous areas of equipment.

In that case, you could be responsible for all injuries and damages.

When someone sues you for product damage, personal property, or personal injury, the court requires them to prove the following:

  • The plaintiff used the product correctly and how it was intended to be used
  • The product has some sort of a defect that resulted in property damage or injury to the plaintiff
  • The defect made the product too hazardous to use

‍Here are the three most common product defects you could be responsible for under strict liability:

Manufacturing Defects

Manufacturing defects are flaws that were created through mass producing a particular product. In other words, there was an error during the manufacturing process, which resulted in a dangerous issue.

Even if you discover one of your products has a defect and take the appropriate action, you are still liable if the product causes harm to anyone or anything. Bummer, huh?

Design Defects

Design defects are another area of product defects.

They involve flaws in the original design of the product that lead to hurting the customer.

And yes, you’re still responsible.

Improperly Labeling Products

Another thing that a plaintiff might point out is that the small business didn’t warn them about something that could cause the consumer harm.

For example, let’s say you sell granola bars with peanuts in them.

If you don’t specifically write on the label that the peanuts inside may cause harm to those who are allergic, someone could sue you if they have a reaction to peanuts and you didn’t warn them.

Someone can sue your business even if they didn’t purchase the product themselves.

This means that other businesses, family members, or just a bystander has grounds to sue you if they are harmed in any way by your product.

How Can You Protect Yourself from Product Liability Claims?

Focusing or product design is your armored shield against strict liability claims. Here are some ways you can make sure your products are in tip top shape:

  • Spot defects before production: Make sure you encourage engineers and your legal team to point out product defects and hazardous features before producing products.
  • Take customer feedback seriously: This can help you spot problematic design elements that might be creep into future products.
  • Invest in warning labels: Detailed warning labels and user manuals lower your risk by informing customers of potential dangers.

Also, purchasing a comprehensive business insurance policy can help cover your legal cost if you end up in court.

Possession of Wild Animals

Exotic or wild animals are unpredictable. So, if you keep one in your possession and they end up harming someone else, you could be liable for their injuries and any other damage the animal causes.

In some jurisdictions, strict liability law may also apply to pet owners if they know that their pet is dangerous.

For example, if you bring your dog to work and the dog bites someone, you’re liable for the incident, as long as you were aware of their dangerous nature.

Even if you provided reasonable care and did your best to guard others against your pet, you’re still accountable by criminal law.

Engaging in Ultra-Hazardous Activities

Abnormally dangerous activities are activities that people don’t usually do that come with a high level of risk. So, if you are engaging in a hazardous activity and you cause harm or damage someone’s property, you or your company is liable.

For example, let’s say your business uses chemicals that accidentally seep into someone’s crops. If the chemicals kill the plants or make the owners sick, your company is liable.

Some other common examples of ultra-hazardous activities are:

  • Storing explosives
  • Blasting or demolition operations
  • Transporting or storing toxic chemicals
  • Controlled burning of buildings and fields
  • Engaging in activities with radioactive materials
  • Disposing of chemical waste

How Can You Defend Yourself from Strict Liability Claims in Court?

If someone brings a strict liability tort or wrongful act case against you, there are several common defense strategies your lawyer may use to win your case.

Some of these defense strategies include:

  • Assumption of risk: Your lawyer may attempt to prove that the person suing you should have known the risk involved when using your product.
  • Statute of limitations: This is when your lawyer will try to prove that the person suing you should have brought the case to your attention sooner. Therefore, too much time has passed, so the case doesn’t have any legs to stand on.
  • Federal regulation: Your lawyer could try to prove that you obeyed all federal regulations. Therefore, strict liability laws don’t apply.

Protect Your Business from Strict Liability

To protect your business from strict liability claims, make sure your products are in great shape and include warning labels if need be.

If you have wild animals or engage in ultra-hazardous activities, you’ll want to develop risk management and risk avoidance plans to safeguard your business from lawsuits.

Finally, one major way you can protect your business is with insurance.

There are various types of coverage you should explore based on your type of business. Some options include general liability and commercial property insurance.

Connect with your insurance agent about getting a suitable insurance policy for your business.

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