When a defective product causes a serious injury, the product manufacturer is legally responsible for the person’s medical bills, lost wages and associated costs. As a small business owner, you can protect your customers and limit your financial risk by making responsible manufacturing decisions.

These smart strategies may help prevent product liability lawsuits that can damage your business.

Understand the types of product liability

Customers can seek damages when they experience an injury caused by a product. These lawsuits can arise from design issues with the product, manufacturing issues and/or marketing problems, such as failure to warn customers of potential dangers of the product.

Implement extensive testing

When you think you have tested your product enough, test it again. When your business sells something that could potentially cause injury, you have a duty to act with reasonable care to ensure the safety of your customers. Carefully document the testing phase of development, since it could serve as evidence that you completed due diligence before releasing your product.

Even if you outsource the manufacturing process, the law holds you responsible for the safety of products you sell, market or distribute through your company.

Use contracts to manage risk

When working with contractors and suppliers, your legal agreements should have provisions that hold each link in the supply chain responsible for the safety of its own products. This type of contract, called a hold harmless agreement, shields you from the omissions, errors and negligence of third parties. The contract should also document that your partners have the appropriate insurance to cover a claim that does arise.

Add warning disclosures

Product packaging should inform customers about how to mitigate all potential safety risks associated with the item. Comprehensive disclosures and detailed user manuals can often limit your liability for injuries arising from user error.