But here’s where it gets interesting: in several cases, companies that don’t actually manufacture a product can still be considered “manufacturers of record” and be held liable for product liability claims.

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“Product liability isn’t just about who made it—it’s about who touched it, sold it, shipped it, or put their name on it,” says Eric Austin, 91șÚÁÏÍű Risk Management Expertise Specialist.

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Curious? Let’s break it down with some real-world scenarios.

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Private Labelling and Branding

Scenario: Picture this: a retail chain partners with a third-party manufacturer to produce goods under its store brand. You’ve probably bought these items—think generic cereals or store-brand electronics.

Manufacturer of Record: Even though the retailer didn’t physically produce the goods,Ìęonce they apply their brand to the product and sell it, they’re considered the manufacturer of record. That means they could be responsible for any defects, safety issues, or liabilities tied to the product.

Example: Perhaps a store-brand toaster causes a house fire due to a manufacturing defect. If the store sold the toaster under their label, they could be considered the manufacturer of record, even though a separate factory made the product.

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Assembled Products

Scenario: Some companies assemble finished products using parts sourced from various manufacturers, branding the final product as their own.

Manufacturer of Record: Even if the company didn’t create the individual components, may place them in the manufacturer’s role. They could be liable for any defects introduced during assembly or related to the final product’s performance.

Example: Think about a laptop company that builds computers using processors, hard drives, and screens sourced from other suppliers. If a short circuit caused by faulty wiring damages the laptop, the assembler—not the component makers—could likely face the liability.

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Companies That Customize or Modify Products

Scenario: A company buys standard products but adds before selling them to customers.

Manufacturer of Record: Once a product is altered, the company responsible for the changes typically assumes liability for any issues resulting from those modifications—even if the original product met all safety requirements.

Example: Picture a seller of industrial equipment adding custom electrical panels to machines. If the modifications lead to a fire or malfunction, the modifying company could be held liable as the manufacturer of record.

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How Can a Company Protect Itself?

Becoming a de facto manufacturer doesn’t have to mean taking on massive risks. Implementing strong protections and best practices, as well as understanding how to protect your business from liability, is essential—not just for legal reasons, but to help build consumer trust and brand resilience. Let’s dive into some practical strategies:

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For Private Labeling and Branding

When you sell a product under your own brand name—even if it’s manufactured by someone else—you could be on the hook for its safety. That’s why detailed contracts with third-party manufacturers are important, including indemnification clauses can help protect you from certain losses, damages or liabilities that may arise from product defects. Also, require product liability insurance that names your company as an additional insured.

Beyond contracts, demand evidence of compliance with safety standards. Be sure to conduct routine quality control inspections and implement a recall response plan to address defects before they escalate into possible lawsuits.

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For Assembled Products

If your product is the sum of many sourced components, liability could still fall on you. That’s why it is recommended you include indemnity clauses in supplier contracts and ensure all component suppliers carry adequate liability insurance, with your company listed as an additional insured.

At the operational level, conduct rigorous quality checks at every stage of the assembly process. Comprehensive liability insurance should cover the entire assembled product to protect against defects that arise during integration. Learn more about at the National Institute of Standards and Technology (NIST).

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For Companies That Customize or Modify Products

Customizing or modifying existing products—whether through design tweaks or functional upgrades—could transfer safety responsibility to you. Protect your business by clearly outlining liability in contracts and using disclaimers for unaltered components.

Crucially, test all modifications thoroughly and certify safety compliance with help from professional engineers when necessary. The Occupational Safety and Health Administration (OSHA) offers on modifying machinery and equipment safely.

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Best Practices for All Businesses

Regardless of your business model, some liability protections are universal:

• Robust Product Liability Insurance: This is your financial safety net for claims involving defects, injuries, or recalls.
• Supplier Audits: Regularly verify that your suppliers meet safety and quality benchmarks.
• Consumer Feedback Channels: Establish systems for customers to report issues and act swiftly on complaints.
• Traceability Systems: Maintain detailed records of sourcing, testing, and manufacturing to streamline recalls and defend against legal claims.
• Legal Counsel: Partner with professionals to draft airtight contracts and stay up to date with evolving regulations.

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Looking Ahead

Navigating the complexities of product liability doesn’t have to be overwhelming. Understanding when your company might be considered a manufacturer, combined with proactive safeguards, can help reduce risk and protect your business. Whether you’re private labeling, assembling, or modifying products, preparation is key to staying ahead of potential challenges.

Prioritize quality control, strengthen your contractual protections, and ensure compliance at every stage of the process. With these steps in place, you can confidently manage liability risks while maintaining trust with your customers. For more expert advice, actionable resources, and tools to safeguard your business, visit our Risk Management page.

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The information provided in this article is for general informational purposes only and does not constitute legal advice. We recommend consulting with an attorney to ensure compliance with all applicable laws and to receive legal advice tailored to your specific circumstances.

Reinsurance, by design, serves as a financial safety net, allowing primary insurance companies to transfer portions of their risk to secondary entities. This process is crucial for maintaining equilibrium in the insurance market, especially during volatile economic times. However, the recent inflationary wave has tested this balance, challenging the industry to adapt and rethink strategies.

The Impact of Inflation on Reinsurance

Economic Inflation: Daily life has become more expensive, and so has the business of insurance. From increased claim payouts due to the rising costs of repairs and replacements, to escalated operating expenses including rent and wages—economic inflation has , compelling insurers and reinsurers alike to recalibrate pricing models and reserve funds.

Social Inflation: Beyond the numbers, societal shifts are also influencing reinsurance costs.

Third-party litigation financing continues to fuel increasing litigation costs that force plaintiffs into protracted litigation and require higher settlements to recover funds. 

 Additionally, legislative changes, such as the extension of time limits for filing cases, and (jury awards exceeding $10 million), reflect a tougher litigation environment. This is compounded by a growing public skepticism towards large corporations, including insurance carriers, demanding a more nuanced approach to managing reputational risks and customer relations.

Market Inflation: Catastrophic events, from natural disasters to large-scale accidents, have always posed a risk to insurers. However, in an era of increased frequency and severity, these events have a magnified impact. Reinsurers, who bear a substantial portion of this risk, , often needing to adjust their thresholds for risk acceptance and pricing.

Strategies for Resilience

In response to these multifaceted challenges, the reinsurance industry is poised to adopt innovative strategies. Some of these strategies include leveraging advanced analytics to better predict risk scenarios, enhancing customer engagement to manage expectations, and reinforcing financial buffers against potential spikes in claims.  However, those strategies are just the beginning. The goal is clear: to fortify the industry’s resilience and ensure it can continue to serve as a pillar of stability in the ever-evolving economic landscape.

As we navigate these turbulent waters, the role of reinsurance in shaping a stable, sustainable future for the insurance market becomes ever more critical. It’s an opportunity for the industry to not only adapt but to innovate and lead in the face of adversity. For a broader understanding of reinsurance and its pivotal role in the global insurance market, read more from the .

Kimberly Vaughn has applied her expertise, passion for great outcomes, and emphasis on teamwork to deliver second-to-none service and grow in her career – and she’s not slowing down anytime soon.

In her role as vice president of claims experience & customer analytics at 91șÚÁÏÍű, Kimberly is focused on providing an exceptional claims experience for agency customers and policyholders. She is responsible for developing and executing a roadmap for the claims customer experience and uncovering ways to leverage data and provide insights to policyholders that positively impact their loss experiences.

Claims Experience Organization – A Unique Service Approach

Kimberly’s passion for commercial insurance and a collaborative claims process is reflected in the strength of her team – the Claims Experience Organization (CXO). Officially launched in November 2021, the CXO serves a broad portfolio of customers and policyholders by facilitating connections, solving problems, providing critical data insight, and supporting the delivery of a consistent claims experience.

In its first full year and as part of the company’s One 91șÚÁÏÍű service value proposition, Kimberly and the CXO team accomplished a number of feats, including instituting policyholder welcome kits to onboard new policyholders to 91șÚÁÏÍű’s service offerings; rolling out account and agency-level dashboards for easy access to claims data; streamlining the claims review process by centralizing the scheduling, coordinating and creating action plan packets; supporting the company’s field marketing & underwriting teams to earn new business; and hosting policyholder presentations and training.

Building Up Those Around Her

Kimberly believes the most effective work environment is one in which a team can sort through many ideas by sharing them aloud, and building off one other’s ideas to ultimately create a better product. Her leadership style can be described as “clear and direct” – she believes everyone would rather be operating with the shared set of information and prefers to make transparent decisions.

Kimberly has a passion for teaching and inspiring other professionals within the industry. She also believes in recognizing opportunities for women and recommending talent within her professional orbit.
“I have personally been the beneficiary of those who have given me a chance to professionally develop,” said Vaughn. “I would not be where I am today if I hadn’t been given those chances.”

Kimberly has made significant contributions to the advancement of younger colleagues, especially in helping them build their confidence. When asked to offer her insight to young women thinking of joining the industry, she shares: “I love to tell young professionals, ‘Own your seat at the table, you’re there for a reason.’ I am passionate about encouraging women colleagues to plan their future and own their place in their professional universe. This helps to move them out of the common mind frame of ‘who am I to say?’”

Making Waves

Kimberly has experienced growth both personally and professionally and strives to try new things. She is a member of the Ann Arbor Triathlon Club, which has over 200 members. She has served on the board of the club, including as president, and as a member of the board helped cultivate a welcoming environment to all levels of athletes, whether elite or casual.

Kimberly’s favorite sport is swimming, and she is a certified lifeguard and a U.S. Masters Swimming Adult Learn-to-Swim certified instructor. She spends time serving as an instructor at the YMCA to coach water-shy adult swimmers. This activity allows Kimberly to positively influence the lives of other adults outside of her professional landscape.

“My area of specialty is working with adults who are scared of the water. Many of my students start too afraid to even put their faces in the water. The day my first-ever student treaded water in the deep end without my help, we both cried! It is really rewarding,” said Vaughn.

Looking ahead, Kimberly is excited about further developing claims team talent and coaching future leaders for 91șÚÁÏÍű, as well as continuing to serve as a positive influence on the insurance industry.

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About Kimberly Vaughn

Kimberly joined 91șÚÁÏÍű in 2013 as a member of the technical claims team, focusing on high severity and high complexity Workers’ Compensation claims. In 2016, she was promoted to Assistant Vice President (AVP) of Workers’ Compensation Claims, before moving into the role of AVP of Claims for the North Region in 2018 and then launching the CXO in 2021. She began her career practicing law in Chicago, first as a member of the plaintiffs’ bar, then as a defense attorney, before returning to her home state of Michigan to join 91șÚÁÏÍű. She earned her Bachelor of Arts and Juris Doctor degrees from Michigan State University and is licensed to practice law in Illinois and Michigan. She is admitted to the U.S. District Court for the Northern District of Illinois, the Northern District of Indiana, and the United State Supreme Court..

Kimberly earned the Certified Litigation Management Professional (CLMP) designation in 2015, the Advanced Claims Professional (ACP) designation in 2020, and the Construction Risk and Insurance Specialist (CRIS) designation in 2021. She is active with Chief, an organization connecting women executive leaders, the Claims and Litigation Management Alliance (CLM), previously serving as dean and faculty member for the CLM Claims College School of Workers’ Compensation, and with RISE Professionals, an organization supporting young professionals in the insurance industry.Ìę She is a frequent speaker on industry topics, most recently with Reuters, ClaimsXchange, and the CLM’s Litigation Management Symposium.

When most people think of products liability, their first thought is around whether a product is safe to use. When creating a product, manufacturers typically focus on design standards, product testing, and the risks associated with packaging, such as instructions and warning labels. These elements are crucial to the safe use of a product, as well as to a company’s bottom line in the event of a liability lawsuit. These focus areas, however, can also leave out opportunities to further improve a product’s safety and reduce the impact of a potential lawsuit.

“When looking at products liability, it is vital to factor in all aspects of the manufacturing process, from the conceptual phase to design and manufacturing to quality assurance, marketing, warranty, and service through end-of-product life. At each phase of the process, there are critical decisions and responses that should be addressed,” said Eric Austin, 91șÚÁÏÍű Risk Management Expertise Specialist.

Product Safety in the Conceptual Phase

There are several historical examples of the need for product safety early in the product development process. The Gilbert U-238 Atomic Energy Laboratory was released in 1950, allowing children to use radioactive material to learn about nuclear and chemical reactions. In addition to a cloud chamber and a wire of Polonium 210, the kit also contained four glass jars containing Uranium-238. About 5,000 of these sets were sold before being removed from the marketplace – not because of the potential danger, but because the price of the set was considered too high for the time at $40. Although this may seem like an extreme example, the idea of providing radioactive materials to children should not have made it past the conceptual phase.

When looking at the big picture, your company should consistently review how products are evaluated, what could go wrong, and if similar products have resulted in losses and lawsuits. If the end user is a child, or if children have the potential to use the item, the standards should be much more stringent.

Design & Quality Assurance

During the design phase, there are several regulatory requirements and additional standards that may be in place and important questions a company should ask, such as:

• Are the design and engineering teams aware of the standards that may apply to a new product?
• If sub-contracted manufacturers are involved in the production process, should they have input on design? They may have pertinent insights on quality control and potential failures.
• When are prototypes are created and, if so, how are these tested?
• Are focus groups used with results being reviewed by engineering?

The design process should always be documented and include a method to review the effectiveness of the process and/or any changes to the product.

The manufacturing and quality assurance phase of product manufacturing should always address in-house vs. sub-contracted work. For example, is the product manufactured all or in-part by another company? ÌęIf so, what type of supplier/subcontractor qualification processes are in place? If your company follows industry standards and regulations, does the subcontracted manufacturer or component supplier follow a similar or higher standard? Is the supplier/subcontractor/manufacturer based in the U.S.? If not does it have a U.S. presence? If the supplier/subcontractor/manufacturer has no U.S. presence, your company could pay for any loss caused by the non-U.S. entity as your company placed to product into the stream of commerce in the U.S.

Product Sales & Reviews

Once a product is ready for distribution, there are several questions that should be asked prior to selling the product in the marketplace:

• What role does the sales team play, and is the sales network in-house or outsourced?
• Have product ads been reviewed by the design, legal, and engineering teams?
• Do you have recall procedures and/or product traceability? Can you determine if there are problems prior to a product failing or if the instructions are unclear?

It’s also important to carefully monitor social media accounts such as Yelp, YouTube, Twitter, and Google Reviews. Monitoring social media accounts allows your company the ability to ascertain that­ a product may not work properly, the user has difficulties, the directions are not clear, or that the product fails quickly. Monitoring these sites and others also allows you to determine instances of product failure and, in certain instances, to try to resolve the issue prior to it going further.

Installation, Service & Repair

Three areas that are tied together in the manufacturing process are installation, service, and repair. In each of these phases, your company can help protect itself against a product liability lawsuit by asking the following questions: When performing an installation, can it be proved that the installation was performed correctly, with all aspects of a machine functioning properly, with all guards in place?

• Are there photographs taken and is a specific checklist used?
• Are service and repair teams are performing the same checks with the equipment, and do they have documented proof that all safeties and guards were installed and functional?
• Are the service, repair, and warranty folks talking to the design team, and even sales?

Employees who work in the service, repair, and warranty departments should be having regular meetings with the design and engineering teams because this is where products may be failing in ways not originally predicted. For example, if a product is being returned with missing guards, or if the guards or warning labels are not lasting for the life of the product, the design and engineering teams need to be alerted as soon as possible. Likewise, repeated warranty issues on a specific item need to be addressed because this is where a potential recall or service bulletin may be considered. If these issues are continually popping up, the sales team will also need to be alerted when it comes to claims made about the product, warnings, changes to instruction manuals, etc.

Assessing the Big Picture

What does the big picture approach tell us about product liability and product safety? It’s easy to see that all departments and individuals must be involved in the process. From the concept and design phase, to manufacturing, service, repair, and warranty work, all employees involved should be trained and ready to alert others if they see a potential issue.

“Industry standards regarding quality and labeling should be utilized, but the process goes much deeper,” Austin said. “One missing piece may result in a situation that could result in an injury or death, plus the loss of revenue and company reputation.”

Does your program address the big picture?