Product Liability for Texas Manufacturers
A single defective product claim can cost a Texas manufacturer $500,000 or more in legal defense and damages — and under Texas strict product liability law, the injured party doesn’t need to prove you were negligent. They only need to prove the product was defective and caused their injury. With North Texas emerging as a significant manufacturing hub — Collin County and the surrounding region are home to hundreds of manufacturers spanning food production, electronics, automotive components, industrial equipment, and consumer goods — product liability insurance is the coverage that keeps a single claim from shutting down your entire operation.
Texas Strict Product Liability Explained
Texas follows the strict liability doctrine for product defect claims, codified in Chapter 82 of the Texas Civil Practice and Remedies Code. Under strict liability, a manufacturer can be held responsible for injuries caused by a defective product even if the manufacturer exercised all possible care in designing and producing the product.
Three types of product defects trigger strict liability in Texas:
Design defects exist when the product’s design is inherently dangerous, even when manufactured exactly as intended. A machine without adequate safety guards, a consumer product with a foreseeable misuse that causes injury, or a chemical formulation with dangerous properties all represent design defects. The plaintiff argues that a safer alternative design existed and would have prevented the injury.
Manufacturing defects occur when a specific unit departs from its intended design due to an error in the production process. A batch of food products contaminated during processing, a metal component with a hidden stress fracture from improper heat treatment, or an assembled product with a missing safety component are all manufacturing defects. The product was designed correctly but built incorrectly.
Marketing defects (failure to warn) arise when the manufacturer fails to provide adequate warnings or instructions about known risks associated with the product. Missing warning labels, incomplete user manuals, inadequate safety data sheets, or failure to communicate known hazards to end users all create marketing defect liability.
The practical impact: If your product injures someone in Texas, the injured party doesn’t need to prove you did anything wrong. They need to prove the product was defective (in design, manufacturing, or marketing) and that the defect caused their injury. Your only defenses are proving the product wasn’t defective, the defect didn’t cause the injury, or a narrow set of statutory defenses (like product alteration by the user or assumption of risk).
What Product Liability Insurance Covers
Product liability insurance protects manufacturers against claims arising from products they design, produce, or distribute. Coverage typically includes:
Bodily injury claims from consumers, end users, bystanders, or workers who are injured by your product. These claims can involve medical expenses, lost wages, pain and suffering, disability, and wrongful death — with verdicts in Texas product liability cases regularly exceeding seven figures.
Property damage claims when your product damages someone else’s property. A component that fails and destroys the larger machine it’s installed in, a chemical product that corrodes a client’s equipment, or a food product that contaminates a retailer’s inventory are all covered property damage claims.
Legal defense costs from the moment a claim is filed through trial, settlement, or judgment. Product liability lawsuits are complex, expensive, and slow — multi-year litigation with expert witnesses, engineering analysis, and extensive discovery is common. Defense costs alone can reach six figures even when you ultimately prevail.
Recall expenses (with a separate endorsement) cover the costs of removing defective products from the market, including notification, shipping, disposal, replacement, and public communications. Voluntary recalls are expensive but far less costly than government-mandated recalls or continued injury claims.
Worldwide coverage protects manufacturers who export products. If your North Texas facility ships components to customers in other states or countries, your product liability exposure extends to every jurisdiction where your products are used.
Highest-Exposure Industries
While every manufacturer faces product liability risk, certain industries generate claims more frequently and with higher severity:
Food and beverage manufacturers face contamination, allergen, and foreign object claims. A single contamination event can trigger thousands of injury claims simultaneously. McKinney, Plano, and the surrounding Collin County area support a growing food manufacturing sector.
Industrial equipment manufacturers produce products used in hazardous work environments. When a machine fails and a worker is injured, the product liability claim adds to the workers comp claim — creating dual exposure for the manufacturer. Guard inadequacy and control system failures are among the most common and most expensive claims.
Automotive and transportation component manufacturers face catastrophic exposure because product failures in vehicles can cause high-speed accidents. A defective brake component, a failed suspension part, or a faulty electrical system can generate multimillion-dollar wrongful death claims.
Chemical and materials manufacturers face both acute injury claims (burns, respiratory damage, poisoning) and chronic exposure claims (cancer, organ damage, reproductive harm). Chronic exposure claims are especially dangerous because they may not surface until decades after exposure, and each claim can involve massive medical costs.
Consumer goods manufacturers face high claim volumes because their products reach large numbers of end users. A product defect affecting 100,000 retail units creates vastly more exposure than the same defect in 500 industrial units.
Structuring Your Coverage Correctly
Most manufacturers need more protection than a standalone product liability policy provides. A properly structured manufacturing insurance program layers multiple coverages:
Primary general liability with product liability forms the foundation. Most manufacturers should carry at least $1 million per occurrence and $2 million aggregate. Your GL policy’s product liability coverage applies to claims arising from products that have left your premises and your control.
Umbrella/excess liability extends your limits above the primary GL. For manufacturers with significant product liability exposure, umbrella limits of $5 million to $25 million are common. The cost per million of umbrella coverage is typically far less than primary coverage, making it an efficient way to increase your protection.
Product recall insurance is a separate policy or endorsement that covers the cost of voluntary and mandatory recalls. This coverage is especially important for food manufacturers, consumer goods producers, and any manufacturer whose products are subject to CPSC or FDA recall authority.
Errors and omissions (E&O) protects manufacturers who provide design, engineering, or consulting services alongside their products. If your engineering specifications contribute to a product failure, E&O coverage fills the gap between product liability and professional liability.
Workers compensation covers your own employees’ on-the-job injuries. Manufacturing environments create significant workers comp exposure from machinery, materials handling, chemical exposure, and repetitive motion. Coordinate your workers comp program with your product liability coverage to ensure no gaps exist.
Build Protection That Matches Your Risk
Every manufactured product carries liability. Whether you produce precision machined components, packaged food, industrial chemicals, or consumer electronics, your exposure begins the moment your product reaches a customer’s hands and extends for as long as that product remains in use. Texas strict liability means you can be held responsible regardless of how carefully you manufacture — the only question is whether you have adequate insurance when a claim arrives.
Contact Collin County Insurance Group for a manufacturing insurance program built around your specific products and exposures. We’ll assess your product types, distribution channels, and claims history to structure primary, umbrella, and specialty coverages that protect your operation. We also coordinate business insurance and workers comp to ensure your entire manufacturing operation is covered under one program.