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Understanding Liability Risks

Liability risk refers to the possibility that a company will have to pay damages resulting from issues with their goods or services. This can come from product defects, failures to meet contractual obligations, or harm caused during business operations. There are three main types of liability risk - general liability from workplace or third party injuries, product liability from defective products harming users, and contractual liability if a company fails to meet its contractual duties. Product liability specifically can arise from design flaws, manufacturing errors, or insufficient warnings and instructions provided to customers. Companies aim to reduce liability risk through careful planning and testing of products and operations.

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36 views1 page

Understanding Liability Risks

Liability risk refers to the possibility that a company will have to pay damages resulting from issues with their goods or services. This can come from product defects, failures to meet contractual obligations, or harm caused during business operations. There are three main types of liability risk - general liability from workplace or third party injuries, product liability from defective products harming users, and contractual liability if a company fails to meet its contractual duties. Product liability specifically can arise from design flaws, manufacturing errors, or insufficient warnings and instructions provided to customers. Companies aim to reduce liability risk through careful planning and testing of products and operations.

Uploaded by

Monique Ramos
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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LIABILITY RISK

(Monique Ramos)
Risk to a company arising from the possibility of liability for damages resulting from the
purchase, ownership, or use of a good or service offered by that company. Liability risk can be
identified and mitigated through careful product design and testing, but may also be inherent in
the nature of the product to some extent, as in the case of automobiles or pharmaceutical
supplies.
A liability risk involves the threat of the company or individual having to bear the consequences
of damage or of breaching standards due to operations, a product, an act or neglect.
General Liability risk
General Liability risk refers to the risk of the company's operations causing damage to the
company's employees, contractual parties or third parties.
Product Liability risk
Product Liability risk refers to the risk of a product launched by the company causing damage to
a person or to other property. Responsibility for a product defect that causes injury lies with all
sellers of the product who are in the distribution chain.
There are three types of defects that might cause injury and give rise to manufacturer or
supplier liability:
1. Design Defects - Present in a product from the beginning, even before it is
manufactured, in that something in the design of the product is inherently unsafe.
2. Manufacturing Defects - Those that occur in the course of a product's manufacture or
assembly.
3. Marketing Defects - Flaws in the way a product is marketed, such as improper labeling,
insufficient instructions, or inadequate safety warnings.
Contractual risk
Contractual risk refers to the risk of contracts not being fulfilled properly or within the agreed
time limit, which can result in losses and other consequences for the company.

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