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liability insurance for manufactured products

Started by Dan_Shade, January 21, 2013, 10:59:08 PM

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Dan_Shade

I guess this is the correct board for this post, it could fit into the drying and processing board too...

I've been thinking about the merits of building and selling some woodworking projects like blanket chests, tables, book cases, etc...

Liability insurance concerns me, if a child pulls over the bookcase on itself, or gets caught under the lid of a blanket chest and the parents sue, I'd like to have liability coverage.  I'd also like to sell lamps, but the liability of fire concerns me.

do any of you guys cary liability on the products you sell?
Woodmizer LT40HDG25 / Stihl 066 alaskan
lots of dull bands and chains

There's a fine line between turning firewood into beautiful things and beautiful things into firewood.

woodhick

Dan I carry liability on "produced products" from my shop.  I carry  one million coverage and it costs about $700 a year so once you start you have to make money to cover expenses.  I considered dropping it to $500,000 coverag but that would only drop premium by about $150 a year.
Woodmizer LT40 Super 42hp Kubota, and more heavy iron woodworking equipment than I have room for.

clww

This is a good topic that you have brought up, Dan. I've never thought about the liability of manufactured goods. Maybe one of our lawyer members will comment on the pros and cons of this.
Many Stihl Saws-16"-60"
"Go Ask The Other Master Chief"
18-Wheeler Driver

Dan_Shade

woodhick, can you PM me your company/underwriter?
Woodmizer LT40HDG25 / Stihl 066 alaskan
lots of dull bands and chains

There's a fine line between turning firewood into beautiful things and beautiful things into firewood.

Brad_bb

The purpose obviously is to protect yourself in case of a problem, but you also want to protect not just your business, but your personal assets.  First you want to set yourself up as a legitimate business.  You need to do this so that you are square with the law from a tax basis.  You must consider what type of business you need to be, a sole proprietorship, an LLC etc.  It depends on what type of business you are doing and it affects your liability.  I just set myself up as a small business, and my CPA was asking me questions about what kind of products I am going to sell.  If I am manufacturing products to sell, I'd have to set up as an LLC.  Initially I'm selling a product made by another company with their brand on it, so I don't have significant liability, but next year I may be selling a product that I manufacture, and therefore will have to become an LLC (Limited liability corporation).  This year I will sell another's product and my net sales will be relatively low, so I can collect sales tax and file under my individual income taxes.  My CPA set me up with quickbooks online to record my sales, expenditures, deposits, and payments.  That will make it easy to do the taxes, and as my venture grows, I can add quickbook features that I need.
Anything someone can design, I can sure figure out how to fix!
If I say it\\\\\\\'s going to take so long, multiply that by at least 3!

Dan_Shade

Is there any benefit to an LLC if you don't have any creditors?
Woodmizer LT40HDG25 / Stihl 066 alaskan
lots of dull bands and chains

There's a fine line between turning firewood into beautiful things and beautiful things into firewood.

Brad_bb

An LLC limits you liability.  So if someone sues over getting hurt by you product, they can come after the business assets in a judgment, but not your personal.  That's my understanding.
Anything someone can design, I can sure figure out how to fix!
If I say it\\\\\\\'s going to take so long, multiply that by at least 3!

OneWithWood

An LLC adds another layer between you and someine suing your business.  I am not convinced it is all that necessary for a sole proprietorship.  A good attorney should be able to jump the hurdle without too much difficulty.
I asked a few local lawyers who were touting the advantages of an LLC for liability protection.  When I asked if they could cite any cases where the LLC had actually made a difference they did not know of any.
Personally, I think it is just another way for lawyers to get into your pocket.
One With Wood
LT40HDG25, Woodmizer DH4000 Kiln

RynSmith

So if one of you multi-talented woodworkers make a chest that someone buys and then their kid shuts the lid on themselves, you really could be sued?   ??? 

Does anyone have direct knowledge of this happening?

OneWithWood

In our society anyone can sue anyone for anything and there are a passal of lawyers willing to take the case.
Having said that I do not know of anyone suing for your particular secenario.
There have been a number of recalls for wood products for various out-there possibilities like something may break and a child might swallow the bits and choke.  There are also a number of recalls and regulations surrounding finish products.
One With Wood
LT40HDG25, Woodmizer DH4000 Kiln

beenthere

QuoteDoes anyone have direct knowledge of this happening?
Only direct knowledge I have is a sawmill owner sued from selling a green rough sawn plank that eventually ended up being used as a scaffold plank. It was planed green and sold to a contractor who used it for quite a while as a scaffold plank when the cross bar on a steel scaffold failed and a man was seriously injured when he fell to the ground.
Long story short, the scaffold mfg. had their behinds covered well enough with paperwork, that the insurance company followed the scaffold plank back to the sawmill. The reason the sawmill owner paid the big claim was based on the steel scaffold cross bar failing due to an elongated knot in the scaffold plank that put all the workers weight concentrated through that knot onto the steel crossbar. The plank was never graded as scaffold grade nor was the sawmill owner aware that the plank he sold would be used in a scaffold. He was the only one that didn't have all the necessary paperwork and signs on his product that might protect him from being sued.
The insurance companies have hired good lawyers to feret out any possibility of recovering money paid out in claims. So being sued is a possibility without knowing where or how the product will be used.

Another one, Oliver Machine made a large industrial radial arm saw. Through its life, it was sold as scrap but someone pulled parts of it out of the scrap pile and reincarnated it as a crude cut-off saw where the top rail retained the Oliver name on it. The crosscut saw was set up poorly and when it was running, it would drift forwards and not stay back. An operator got some fingers or arm cut off and the insurance company went after Oliver because that is the name connected with the saw involved in the accident. Oliver paid in the end.
south central Wisconsin
It may be that my sole purpose in life is simply to serve as a warning to others

Brad_bb

Many times its cheaper to pay a settlement than the cost of litigating even though you are not at fault and would likely win.  But there are no garantees.  A judge can decide any way he wishes.  There is no garanteed justice.  And many times settlement is cheaper and a better garantee.  Our family business has been sued for nonsense.  It's not fair that you have to pay often when you are in the right.  It's a wake up call to the ordinary person that it works this way, but life is seldom fair.  You have to do thing the right way and protect yourself.  And even then you are not completely protected.  Yes you can get sued for a simple blanket chest.  Don't think you can get away without ant protections.  Lawyer will go after whoever has money or assets.  They'll go after the deepest pockets they can, and if you have no protection, say bye bye to your kids college fund or what ever else you have.
Anything someone can design, I can sure figure out how to fix!
If I say it\\\\\\\'s going to take so long, multiply that by at least 3!

woodsteach

Ya know.. as a teacher I used to be very concerned about this very thing.  If Johnny takes this _____ home and then someone gets hurt.  Any more I don't worry about it.  You have to be proven guilty of neglect by a jury of your peers (I think this is still true).  Unfortunately it is not about guilt or lack of, it is about who has the best lawyer.

I teach woods and metals and worrying about the liability of what if's could kill you.  We send out trailers, truck repairs/modifications, etc.  I do my very best to make certain that what ever leaves "my" shop is ok but could always miss something. 

I guess maybe it is location and I'll keep my location.

Brand X Swing Mill, JD 317 Skidloader, MS460 & 290, the best family a guy could ever dream of...all provided by God up above.  (with help from our banker ; ) )

inspectorwoody

I was reading where two guys are suing Subway because their foot longs are not 12".

Out of New Jersey. Apparently they measured subs from several different stores.




metalspinner

 :D  Then I can sue the big box stores for selling me 2x4's that are really 1.5 x 3.5????  8) 8)

In regards to the blanket chest concerns, a real danger is a lid slamming down on small fingers. Or a lockable lid where a child can get stuck in there and sufficate.

Shelves and bookcases need to be secured to a wall.
I do what the little voices in my wife's head tell me to do.

Cedarman

Is subway selling a 12" sandwich or a footlong sandwich? 

On the scaffold board, how could they prove where the board came from?
Was it stamped as to where it came from?

We do carry liability insurance that is based on dollar of sales.
I am in the pink when sawing cedar.

RynSmith

Cedarman, I'm under the impression you mainly sell lumber (correct me as necessary).  Could you give me examples of what you might be liable for?  Thanks.

1woodguy

    Cedarman
I like the way you think!  :)
    I wondered the same Thing about the sandwich
And that the board would be hard to prove unless marked
Experience is a rough teacher first you get the test later comes the lesson!

beenthere

QuoteOn the scaffold board, how could they prove where the board came from?
Was it stamped as to where it came from?

Good point, and whatever trail left from the sawmill to becomming a scaffold plank is one I don't know. But there was enough of a link and enough evidence that the jury decided the sawmill had to pay the insurance company in the end. Maybe each seller/buyer combination owned up to the movement.   ::) ::)
It may have been stamped with a grade with the mill number on it. It wasn't graded to be a scaffold plank.
Just one of several examples of what lies in wait within the big business the insurance companies and lawyers have become to make their business's flourish. I know, it is not pretty.

south central Wisconsin
It may be that my sole purpose in life is simply to serve as a warning to others

Cedarman

We make a lot of T&G paneling for homes and businesses.  Flooring.  A specialized sawdust for several different industries.  A lot of wood for pergolas.  A lot of fencing materials, cut and ready to put up.  Cedar mulch.  I sometimes worry about the peanut hulls that get thrown on the floor and swept up put on the belt into the hog and into the truck.  That one person who is alergic happens to sniff a peanut shell. We make flute blanks and fishing lure blanks that might explode on a lathe.

I hate insurance, but liability insurance gives me some peace of mind.
I am in the pink when sawing cedar.

RynSmith


WDH

Ryn,

It is good that Cedarman did not leave you hanging  :D.
Woodmizer LT40HDD35, John Deere 2155, Kubota M5-111, Kubota L2501, Nyle L53 Dehumidification Kiln, and a passion for all things with leafs, twigs, and bark.  hamsleyhardwood.com

RynSmith

  :D  :D  ;D

If I was any good with (and/or owned) a digital camera, I'd fix that, I swear!

WDH

Woodmizer LT40HDD35, John Deere 2155, Kubota M5-111, Kubota L2501, Nyle L53 Dehumidification Kiln, and a passion for all things with leafs, twigs, and bark.  hamsleyhardwood.com

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