Does general liability insurance cover product liability?
Some general liability policies include limited product liability coverage, but many businesses need an additional policy for full protection. If you manufacture or sell products, review your coverage with an expert to avoid costly gaps.
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Complete Guide to Product Liability and General Liability Insurance
Why This Question Matters for Colorado and Utah Residents
Product liability can dramatically impact businesses in Colorado and Utah, especially with the large number of manufacturers, agricultural producers, and local retailers. Understanding your coverage can mean the difference between surviving a lawsuit and shuttering your business. Factors like Colorado's Construction Defect Action Reform Act (CDARA) and Utah's rapidly growing food and beverage scene make product liability risks real and specific here.
- Catastrophic Claim Potential: Product liability lawsuits in the region frequently exceed $100,000, and some cases can climb to $1 million or more, especially for defective equipment or contaminated food.
- Industry-Specific Risks: Local manufacturers, contractors, and agricultural businesses (especially in Weld, Larimer, and Salt Lake counties) face a higher-than-average chance of product or completed operations claims.
- Contract & Regulatory Requirements: Many construction contracts along Colorado's Front Range and wholesale purchase agreements in Utah require explicit product liability protection, not just standard general liability.
What Most People Get Wrong
Many business owners mistakenly assume that their general liability (GL) policy always covers any product-related lawsuit. In reality, many GL policies include only limited or optional product liability coverage, and exclusions can apply for industry-specific risks, especially if you manufacture, distribute, or alter products.
Another common error: not realizing that some contracts or jurisdictions (like public works projects in Larimer County) require separate, named product liability policies or higher limits than standard GL provides.
The Complete Picture
General liability insurance generally covers claims related to bodily injury, property damage, and legal defense arising from your business operations, including some product liability scenarios. For example, a standard GL policy may respond if a retail product you sell causes injury and you are named in a suit.
However, if your business manufactures, alters, or significantly repackages products—or if you operate in high-risk sectors like construction, agriculture, or food production—most insurance carriers recommend (or require) a separate product liability policy for adequate protection. Product liability claims often stem from injuries due to design or manufacturing defects, contaminated foods, or equipment faults. In Colorado, contractors face unique completed operations/product liability exposures enforced under CDARA, with required endorsements and higher coverage minimums ($1M/$2M or more) common in local contracts. Utah businesses in the cannabis, supplement, or artisanal foods sectors are often contractually obligated to carry standalone product liability as well.
Premiums reflect these risks: In Northern Colorado, standalone product liability policies for small manufacturers average $115–$300/month, while GL alone (with limited product coverage) can be as low as $50–$100/month—but this may leave significant gaps. Approximately 74% of Colorado businesses facing six-figure product claims without specialty coverage go out of business within two years. That’s why an independent local specialist is key—evaluation and tailoring your coverage to your actual risks and operations.
Making the Right Decision for Colorado and Utah Residents
Question 1: Does my current GL policy specifically include product liability—and is it enough?
Don't assume. Review your policy declarations and exclusions with an expert. Many standard GLs exclude or limit coverage for products after they leave your control.
- Check for 'Products-Completed Operations' coverage and its limits.
- Ask if your industry or contracts (especially construction, manufacturing, food/beverage) require separate product liability endorsements or standalone policies.
Question 2: What are the real costs of a product liability claim in my industry?
Product claims are among the highest-loss events for Colorado and Utah businesses. Manufacturing injuries, contaminated foods, or recalled goods can all trigger six-figure losses.
- Typical defense costs for a product lawsuit exceed $120,000 in Colorado and $95,000 in Utah.
- Settlements or judgments may surpass $250,000—even for small operations.
Question 3: Am I contractually or legally obligated to maintain product liability coverage?
Many local contracts, particularly in Northern Colorado (Larimer County, Weld County) and on Utah public projects, mandate specific product liability limits ($1M/$2M+). Review every contract—being underinsured or relying solely on standard GL can breach agreements or leave you uninsured when you need protection most.
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Real World Examples
Fort Collins Toy Manufacturer: The Six-Figure Product Case
Background: Emily runs a small toy manufacturing shop off Harmony Road in Fort Collins. Her business produces handcrafted wooden puzzles sold online and at local retailers.
Coverage: Emily’s general liability policy included a $1M/$2M aggregate limit with $100,000 for product liability but no separate policy.
Monthly Premium: $196/month ($2,352/year)
The Incident: A puzzle piece came loose and was swallowed by a toddler, resulting in a hospital stay. The family sued for $210,000, including medical bills and damages.
Total Claim Cost: $210,000 (medical: $55,000, legal defense: $60,000, settlement: $95,000)
Emily’s Cost: $5,000 deductible—her GL carrier covered the rest up to the policy’s product limit, but any higher award would have left her exposed.
"I’m so grateful I had something in place, but now I know I need to review these limits every year. Without coverage—even just for defense—I would have lost my shop."
Greeley Agribusiness: The Harvest Recall
Background: David owns a small-scale agricultural co-op outside Greeley, CO, selling packaged salad greens to local grocers.
Coverage: General liability policy bundled with farm equipment, but no product liability endorsement. Policy limit: $500,000 (GL only).
Monthly Premium: $88/month ($1,056/year)
The Incident: After a contaminated batch of greens caused a minor salmonella outbreak, three customers filed suit. Medical and recall costs mounted quickly.
Total Claim Cost: $140,000 (recall: $45,000, medical: $35,000, legal defense: $60,000)
David’s Cost: $140,000—his GL policy did not cover product recall or contamination claims. The entire expense was out-of-pocket, threatening his farm's survival.
"I never thought something as basic as lettuce could create this much risk. I wish I had added product liability—it’s a huge lesson for every farmer in our area."
Salt Lake City Retailer: Unsafe Appliance Lawsuit
Background: Carlos manages a small appliance shop off I-15 in Salt Lake City, specializing in imported blenders and toasters.
Coverage: General liability (with $1M/$2M limits) included a $250,000 product liability sublimit; no standalone product liability.
Monthly Premium: $145/month ($1,740/year)
The Incident: A faulty blender overheated, causing a minor fire in a customer’s home. The customer sued for $65,000 in damages; a wholesaler involved in the supply chain sued Carlos for contribution.
Total Claim Cost: $78,000 (damages: $65,000, legal defense: $13,000)
Carlos’s Cost: $1,500 deductible—insurance covered the rest up to the sublimit. Had the claim exceeded $250,000, the remainder would have been uncovered.
"Seeing the legal costs stack up was terrifying. After the case, I worked with a FoCoIns advisor to boost my product liability—not just GL. It’s worth the peace of mind."
Avoid These Common Mistakes
Mistake #1: Assuming Standard General Liability Covers All Product Risks
What People Do: Rely solely on their standard GL policy for any product-related claims, never reviewing the specifics.
Why It Seems Logical: 'Product liability' is often generically listed in GL summaries, or owners assume 'liability' means all exposures are addressed.
The Real Cost: In Northern Colorado and Utah, the average uncovered product claim is $120,000–$350,000. Many GL policies have low sublimits or outright exclusions—leaving businesses to pay defense and damages out-of-pocket.
Smart Alternative: Have your FoCoIns advisor review both your products-completed operations coverage and any endorsements/exclusions. Update or add standalone product liability if you’re manufacturing, importing, altering, or distributing goods.
Mistake #2: Not Adjusting Coverage as Business Grows or Risks Change
What People Do: Renew insurance without increasing limits or adding product liability, even as sales, product lines, or geographic reach expand.
Why It Seems Logical: The original GL policy was sufficient when the business was small, so owners assume it automatically keeps up with growth.
The Real Cost: A Greeley co-packer saw claim costs surge over $140,000 after recall liability was excluded from their outdated GL policy. In Utah, growing retailers faced six-figure gaps after expanding to online and out-of-state sales without proper coverage.
Smart Alternative: Schedule a yearly insurance review—especially after launching new products, increasing production, or entering new markets. FoCoIns can compare your risks with industry benchmarks and regional exposures.
Mistake #3: Ignoring Contract Requirements for Product Liability
What People Do: Sign vendor or construction contracts without checking if they require specific product liability coverage or limits.
Why It Seems Logical: GL policies are assumed to satisfy all contractual insurance terms, especially for smaller projects or local clients.
The Real Cost: A Larimer County contractor lost a $760,000 public project after failing to provide a $2M product liability certificate. Non-compliance can mean breach of contract, loss of revenue, or denied claims.
Smart Alternative: Always submit every contract or RFP to your FoCoIns advisor before signing. We check compliance and help you meet or negotiate terms—protecting your business and reputation.
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