{"id":9905,"date":"2025-12-19T06:30:00","date_gmt":"2025-12-19T14:30:00","guid":{"rendered":"https:\/\/www.businessinsuranceusa.com\/blog\/?p=9905"},"modified":"2026-03-17T11:33:58","modified_gmt":"2026-03-17T18:33:58","slug":"what-happens-when-your-product-causes-harm-even-online","status":"publish","type":"post","link":"https:\/\/www.businessinsuranceusa.com\/blog\/insurance\/what-happens-when-your-product-causes-harm-even-online\/","title":{"rendered":"What Happens When Your Product Causes Harm \u2014 Even Online"},"content":{"rendered":"

Estimated reading time: <\/span>9<\/span> minutes<\/span><\/p>\n

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This article is for general information and not legal advice. Laws vary by state. Consider speaking with a qualified attorney and licensed insurance professional.<\/p>\n

When creating or reselling a product, you anticipate helping people or fueling satisfaction, not hurting them. You put careful care into designing or picking a product, with both quality and safety in mind. Maybe you even purposely choose low-risk products with the intent of limiting your legal risk.<\/p>\n

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The truth is, any product has the potential to cause harm, not just pharmaceuticals, supplements, and prepared food products. Even children\u2019s clothing, a pet toy, a small lamp, or basic consumer electronics can pose a risk.<\/p>\n

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If someone gets sick or injured from your product, it could potentially hurt your entire business.<\/p>\n

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Liability is Still There When Selling Online<\/strong><\/h3>\n

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A misconception is that e-commerce sellers are protected from product liability<\/a>. Small resellers and inexperienced dropshippers often think that because they didn\u2019t make or design the product, they\u2019re not responsible if something goes wrong, until they find out the hard way.<\/p>\n

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The U.S. law on product liability<\/a> has a different perspective.<\/p>\n

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In many situations, parties across the distribution chain\u2014including sellers\u2014can face product liability claims, though rules and defenses vary by state and case.<\/p>\n

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Are defective products really that common, you might ask? Statistics tell you all you need to know. According to the National Safety Council<\/a>, total product injuries in the United States were 15,068,979 in 2024. These injuries also jumped by nearly 18% in 2024 from 2023.<\/p>\n

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The point is, defective products are more common than you think. To top it off, even if you\u2019re just reselling an item, you can still be pulled into an injured consumer\u2019s claim.<\/p>\n

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How Does Product Liability Work?<\/strong><\/h3>\n

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There are three main types of defective product claims<\/a>:<\/p>\n

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      1. Design defects<\/strong>: Something wrong with the product\u2019s design that could be potentially harmful, like a poorly-designed battery that overheats and risks fire<\/li>\n<\/ol>\n<\/li>\n<\/ol>\n

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          1. Manufacturing defects<\/strong>: An error occurred during production, such as a poorly sealed can of soup<\/li>\n<\/ol>\n<\/li>\n<\/ol>\n

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            1. Marketing or labeling defects<\/strong>: Missing or false information on a product\u2019s label, like incorrect instructions or claiming a food product is organic when it isn\u2019t<\/li>\n<\/ol>\n<\/li>\n<\/ol>\n

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              As a seller, you don\u2019t have to be involved with the design or manufacturing aspects of a product to be held liable for a marketing or labeling defect.<\/p>\n

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              It\u2019s as simple as marketing a supplement as all natural when it contains one ingredient that isn\u2019t. Or claiming a toy is for ages three and up when it has small parts, posing a choking hazard for an infant<\/p>\n

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              Even if it wasn\u2019t intentional, your liability doesn\u2019t go away.<\/p>\n

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              Trust me, going to court for something like this is not affordable for the average small business owner. You can end up spending thousands of dollars in legal fees before your first court appearance, that is, if you lack the proper insurance.<\/p>\n

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              A Real-Life Example of Product Liability<\/strong><\/h3>\n

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              Looking at an actual scenario to understand how detrimental product liability <\/a>can be.<\/p>\n

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              Jenna makes decorative candle holders and strictly sells them online. She\u2019s been making these holders for several years and has been quite successful.<\/p>\n

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              One day, she decides to use a different material to make candle holders out of. This new material hardens faster and is cheaper, allowing her to keep up with her heavy demand while earning more per sale.<\/p>\n

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              Shortly after she sold a couple of her candle holders to a customer, Jenna was hit with a lawsuit. The customer claimed Jenna\u2019s homemade candle holders were flammable. Not long after lighting, the holders themselves caught on fire. This resulted in the customer\u2019s custom wooden table catching on fire. It also caused smoke damage to an adjacent wall, which had to be replaced.<\/p>\n

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              The damages ended up being over $10,000. Since Jenna created the entire product herself, she was liable for the full damages. Even if she was simply reselling the item, she\u2019d still be a part of the lawsuit for selling a defective product that doesn\u2019t function as intended, is dangerous, and was poorly marketed (no mention of flammability).<\/p>\n

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              Jenna filed a claim with her homeowner\u2019s insurance. Unfortunately, they denied it. Even though her business is licensed to operate inside her home, her insurer doesn\u2019t cover business-related damages.<\/p>\n

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              That left Jenna paying all of the damages out of pocket. On the other hand, product liability insurance would have protected her financially.<\/p>\n

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              The Troubles with Selling Products Online<\/strong><\/h3>\n

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              Online sellers who never physically touch the products they sell can still be liable for a defective product. This holds in cases where another company ships out orders on their behalf.<\/p>\n

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              Even if the major platforms a seller sells on won\u2019t help. Take Amazon as an example. As of 2021, they put liability back on their third-party sellers for any defective products they sell.<\/p>\n

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              While Amazon offers an A-to-Z Guarantee for certain purchase issues, it has also expanded processes to address personal injury or property damage claims related to defective products. The exact eligibility and limits depend on the program and transaction type.<\/p>\n

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              This makes selling products online, whether they\u2019re your own homemade goods or you\u2019re dropshipping from another country, risky without liability insurance.<\/p>\n

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              What\u2019s Covered Under Product Liability Insurance?<\/strong><\/h3>\n

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              Product liability insurance protects sellers if their product causes injury, illness, or property damage to a consumer. Coverage usually involves:<\/p>\n

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