Like other contract manufacturers, plastic injection molders and toolmakers have unique challenges when it comes to obtaining comprehensive, affordable product liability insurance. First, we serve a wide variety of markets, from medical to electronics to consumer products, and cannot predict what type of products we will be making from one month to the next. Second, we usually make only a single component part of our customer’s product, and thus may not know how the completed product will be used or what its risks are. These two factors alone make it hard for an insurer to properly evaluate its exposure for the products of a typical contract manufacturer.
Suppose you make a plastic “clip.” A diligent insurer will ask where that clip is going - on a pen, in a car, on a blood vessel? An insurer may refuse to cover a risk it does not understand, or may only cover it to a very limited degree and at a very high price. Not disclosing or mischaracterizing to your insurer what you know about the nature of your product could be a big problem in the event of a claim. On the other hand, if you have disclosed it and the insurer then declines to cover you, how would you like to tell your customer that? If the coverage is available but the premium is astronomical, can you add that cost into your quoted price and still be competitive? These questions may not have easy or pleasant answers, we’ve found. But simply ignoring them could have far more unpleasant consequences, so we think these are things every contract manufacturer needs to ask.