Private Label Products

Believe it or not, many businesses assume products liability without ever realizing it. Product liability is the responsibility a business assumes for any property damage or injury their product may cause. On the surface, one would think that only a manufacturing company would have this exposure. But that simply isn't true.

I was just in a small salon the other day that had their own line of hair dyes and hair products. The salon owner thought it really made his business look top notch to have their very own line of hair dye, but he got much more than just a label with his personalized dyes.

I asked him if they were standard colors, or if he had a hand in making them. I think it started to hit him, he really did manufacture something. He told me that a representative came out from the manufacturer, sat down with him and helped him customize everything. From the base, to the dyes, he picked it. It was the same for all the other hair products too. That's just how contract manufactures work. They make products at your specific direction. That way, if something goes wrong, all the responsibility rests on the creator of the formula. But the salon owner isn't a chemist, so how could he have known what was safe and what wasn't?

Well, 99% of the time, there are no problems. The contract manufacturer is going to use standard, well tested ingredients. But sometimes things do go wrong. If the products in his salon injured someone, the salon would be primarily responsible, because their label is on the goods. To top it off, the contract manufacturer was based in another country, making it even harder for them to share responsibility.

The principle holds true for many others, not just salons. Food stores with private label "store brands," paint shops, cleaning companies, electronics, even pharmacies. When you put your brand on a product, even if you don't make it yourself, you're responsible for it. So how do you mitigate this risk? Demand vendor's coverage from your contract manufacturer. This is a certificate that says they will defend you if anything goes wrong with the product and that they have specific insurance to back it up. If they won't give it to you, ask them why.

If need be, your own insurance may include products liability and may help protect your business. Be an informed business owner, and discuss it with your broker. Better yet, give me a call.