For Canadian distributors in the U.S., the world has become a lot more complex, especially for those that manufacture.
In general, the insurance companies know that the claim frequency is higher and the settlements are also greater in the U.S. due to the product liability exposures.
The U.S. customer is demanding higher product standards and evidence of product liability insurance. If you are importing product from the Far East, often they carry no liability insurance, or one that is not suitable for North American exposures. In the event that a product causes injury, the distributor may be the deepest pocket available. In effect the distributor is seen as the manufacturer. Which brings us to our main point. Premiums for this exposure are high, so this additional cost must be factored into the distributor’s costs.
What can be done to help you?
NAFTA rules compel Canadian courts to enforce judgements secured elsewhere, so do not ignore actions brought against you from the U.S.. The sooner you act the better you can defend.
Do not think that a domestic or foreign shell company will protect you. The courts are increasingly unwilling to permit defendants to hide behind these walls.
Make sure the products meet the appropriate safety standards such as CSA or ULC.
If you are the manufacturer, keep documented records of your safety inspections at all stages of manufacture. Any record keeping you do before, during and after manufacture will go along way while securing an insurance policy and also while being a defendant in a liability lawsuit.
Make sure you are adequately insured for U.S. exposures! We would encourage you to not self insure. If there is one thing that would shut your business down it would be a multi-million dollar lawsuit. Just the legal costs alone can be amazing! Remember that product Liability lawsuits can be reported several years after the injury takes place, so you must carry product liability insurance for several years after sales to the U.S. are discontinued.
Be sure to seek advice and purchase insurance from an insurance broker who understands your business!