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The risk of product liability when importing foreign manufacturing materials

LAC6530 — Wed, 27 Jun 2018 16:47:30 +0000

The risk of product liability when importing foreign manufacturing materials LAC6530 Wed, 06/27/2018 - 12:47

Foreign importing can be a viable option for many manufacturing operations. But, there are some unique exposures associated with this practice. Both manufacturers and distributors in the U.S. need to know the added risk of importing materials.

The good news - businesses that take steps up front to manage risk can have success with foreign importing.

The big problem with foreign importing is product liability. To truly understand the risk of foreign importing, you need to review product liability first.

Product liability is considered strict liability, which means the "producer" is responsible for any defects, whether or not they were careless or at-fault.

If someone is injured because of the product - whether they purchased it themselves or were visitors or simply bystanders at a business that purchased the product - they can sue for damages. Here's the kicker - the injured person doesn't have to prove how or if the manufacturer or distributor was careless. They only have to prove the product was defective and that the faulty product caused their injury. This greatly expands the chance of a lawsuit.

If you're the producer, you're liable for your products, even if the damage was a result of a material you imported and not through your fault or carelessness.

Are you the producer? You're the producer if you're any of the following:

The manufacturer of a finished product
The producer of any raw material
The manufacturer of a component part
Any person who places their name, trademark or other distinguishing feature on the product or somehow alters the product

Do any of these describe your business? Then you're the producer.

How does this affect your importing relationship? If a foreign company doesn't have a U.S. location, the U.S. entity who imports a product from that foreign company is considered to be the manufacturer or producer. If you're the one importing from that foreign company … you're the producer. And you're responsible for the liability.

This is a discussion you want to have with your legal advisors and your insurance agent. Talk through your options and your risk and make sure you have the right risk management practices in place before you start importing.

Standards and product safety regulation also vary by country. If a product is faulty, it can be difficult for you to enforce contracts. It can also be hard to require a foreign manufacturer to indemnify you as a U.S. manufacturer distributor. In some cases, the foreign manufacturer may require jurisdiction to take place on their turf, posing additional expense to your U.S.-based company.

Questions to ask when partnering with a foreign entity

Asking these questions can help protect your business when importing foreign metal manufacturing materials:

Does the foreign manufacturer have product liability insurance? Do they have or would they be willing to obtain a U.S. product liability policy?
Does the imported product meet all U.S. standards and regulations? Does the entity have a quality control program in place?
If there's a known problem with a manufactured product, will the foreign manufacturer contact you to inform you of the defect or issue, so that you may take appropriate action?
Has the foreign manufacturer ever had any prior products recalled or violated any U.S. regulation?

Addressing the product liability issues up front is critical to your success when importing foreign materials.

State Auto Insurance makes no representations or guarantee as to the correctness or sufficiency of any information contained herein, nor guarantees results based upon use of this information. State Auto does not warrant that reliance upon this document will prevent accident and losses or satisfy federal, state and local codes, ordinances and regulations. The reader assumes entire risk as to use of this information.

The major dangers of dust in manufacturing

LAC6530 — Fri, 22 Jun 2018 18:15:19 +0000

The major dangers of dust in manufacturing LAC6530 Fri, 06/22/2018 - 14:15

When you hear about workers' comp claims, do you automatically think of people getting hurt by falling? Or maybe you think of injuries from equipment. These are both certainly scary realities, especially in the manufacturing industry. But our experience in risk management reflects the fact that illness caused by dust inhalation is just as serious.

If you're serious about protecting the health and safety of your workers, you have to get up-to-speed on dust exposure.

Dust exposure is inherent in manufacturing and many workers are exposed every single day. Inhaling this dust can cause chronic illnesses. Dust can damage the lung tissue and lead to "dusty lungs" - the common term for Pneumoconiosis - which is permanent lung damage.

Silica is in materials like concrete and stone. When construction workers cut these silica-laden materials, they're exposed to the dust.

When it comes to manufacturing, there are two other types of dust that can cause major health issues for workers - hard metal lung disease and chronic beryllium disease.

Hard metal lung disease is related to the use of cobalt.

This disease is prevalent in operations using "hard metal", or cemented tungsten carbide, which contains cobalt. You might not think this applies to you if you're not manufacturing high-speed cutting, drilling, grinding or polishing tools. But, it's also a risk for operations that use these tools.

The Centers for Disease Control and Prevention estimates that more than 1 million workers are exposed to cobalt during hard metal production and processing. Exposure can even happen while sharpening tools.

Chronic beryllium disease is still common despite current regulations.

Tons of every day products, like computers and golf clubs, contain beryllium. This metal is common - which perhaps makes it an even more serious issue for manufacturing workers.

Workplace safety regulations for beryllium have responded to the risks posed by this type of dust. The more severe and sudden effects on workers are less common now, thanks to these regulations. But still, the risk remains and is often seen in chronic conditions that develop over time and gradually can result in some very serious health problems.

Once lung fibrosis develops, it can get worse, even if you're no longer exposed to the source.

Even if your particular operation has less risk of the hard metal or beryllium exposure, any dust can be dangerous for workers. It sounds simple, but you might be surprised how often insurance professionals see casual use of protective equipment.

We've seen three things that can really make a difference:

First, enforce the use of protective equipment, including masks and respirators, eye protection, and disposable clothing, including on shoes, heads and hands. This includes leaving masks and respirators on until clothes are off and sealed away.

Second, you have to have a plan for dust containment and removal. This includes dust removed from the workplace and dust on employees' disposable clothing. Make sure clothes are removed and placed in sealed containers before transporting outside.

And finally, focus on education. Make sure training and resource materials are available to employees at all times, and hold regular safety meetings for your employees.

Dust exposure needs to be a priority in the manufacturing industry. Many operations take this seriously and have positive results - healthier workers and lower workers' comp insurance costs.

If you want more on managing risk in metal manufacturing, State Auto has an infographic with detail and tips.

State Auto Insurance makes no representations or guarantee as to the correctness or sufficiency of any information contained herein, nor guarantees results based upon use of this information. State Auto does not warrant that reliance upon this document will prevent accident and losses or satisfy federal, state and local codes, ordinances and regulations. The reader assumes entire risk as to use of this information.

Managing risk in the metal industry

SIL6504 — Fri, 22 Jun 2018 17:43:58 +0000

Managing risk in the metal industry SIL6504 Fri, 06/22/2018 - 13:43

If you operate in the metal industry, we don't need to tell you that your business and your workers face unique hazards. We can help make sure you have the right protection. State Auto has a sophisticated risk review and management process focused on your industry. Learn more about our insurance solutions for the metal industry.

If you import foreign manufacturing materials, here’s how to protect your business

LAC6530 — Fri, 22 Jun 2018 14:27:15 +0000

If you import foreign manufacturing materials, here’s how to protect your business LAC6530 Fri, 06/22/2018 - 10:27

In today's global market, many manufacturers and distributors are choosing to import materials from outside the U.S. Foreign imports can be a sound business move, but it comes with some inherent risks. If your business is importing foreign manufacturing materials, it needs to be addressed in your risk management program.

While it may seem like a supply and distribution issue, there are some major insurance concerns associated with using foreign materials in your operation.

One of the largest areas of concern with foreign materials is product liability. Why is product liability the big issue? My colleague Tina Jaeger wrote about the product liability problem, if you want the details.

There are a lot of key questions you want to ask up front when considering a partnership with a foreign company. These questions are focused on the product liability issue:

Does the foreign manufacturer have product liability insurance? Do they have or would they be willing to obtain a U.S. product liability policy?
Does the imported product meet all U.S. standards and regulations? Does the entity have a quality control program in place?
If there is a known problem with a manufactured product, will the foreign manufacturer contact you to inform you of the defect or issue, so that you may take appropriate action?
Has the foreign manufacturer ever had any prior products recalled or violated any U.S. regulation?

Talk about these questions - and the answers you get - with your insurance agent and other professional advisors.

In our experience, we find the most successful partnerships between manufacturers and foreign suppliers have some common characteristics. At minimum, these steps are just good business practices, and at most, they could make the difference in protecting your operation.

First, establish a direct relationship with the foreign manufacturer/importer. Make sure you're directly involved and not relying solely on an indirect relationship.

Get to know the company really well. Your business is about to depend on theirs. Understand the financial capabilities, insurance standards, quality control/testing program and reputation of the foreign manufacturer.

Make sure you have a solid contract in place. And have your insurance agent review it, too. The contract should require the foreign company to:

Indemnify for costs arising from faulty products.
Request the importer to obtain a U.S. products liability policy.
Stipulate the country arbitration will take place if issues arise.
Provide proof of insurance, particularly product liability coverage.
Request to be named as an Additional Insured on the importer's policy.

Another reason to have your insurance agent review your plans with you - you may need to consider cargo insurance to cover your goods in transit.

If you pay for goods prior to receipt are they're damaged prior to arrival, insurance can provide protection for those goods. Cargo insurance can also potentially expedite the release of your items after arrival to the U.S. Some foreign products require a bond or deposit. Insurance allows the insurance carrier to assume responsibility for the property and can speed up the release of cargo.

This next one is in the category of a good business practice whether or not you import materials. Enforce your quality control programs.

Many aspects of the importing relationship require you to rely on the foreign importer to do the right thing. But a quality control program is completely within your control.

You can handle your quality control program within your company, or bring in a third party vendor to help if you don't have the resources or the expertise to do it yourself.

A basic quality control program includes:

Inspection and testing of incoming products or materials
A process to handle items that do not meet standards(for products that have not yet been placed in the market)
Corrective procedures for handling of defective or recalled items( for products that have already been placed in the market)
Tracking system to identify product origin and purchasers

The Consumer Products Safety Commission www.cpsc.gov is an insightful resource on the importing process. They provide recall guidance and information on working with specific countries, such as China.

The risk involved when importing foreign manufacturing materials is another reason you need an independent insurance agent - someone with the expertise to help you work through these issues and make sure your business is protected.

Enforcing lockout / tag-out saves lives infographic

LAC6530 — Fri, 22 Jun 2018 14:22:23 +0000

Enforcing lockout / tag-out saves lives infographic LAC6530 Fri, 06/22/2018 - 10:22

Download full size infographic

Information contained in this publication was obtained from sources believed to be reliable. State Auto Insurance makes no representations or guarantee as to the correctness or sufficiency of any information contained herein, nor guarantees results based upon use of this information. State Auto Insurance disclaims all warranties expressed or implied regarding merchantability, fitness for use and fitness for a particular purpose. State Auto Insurance does not warrant that reliance upon this document will prevent accident and losses or satisfy federal, state and local codes, ordinances and regulations. The reader assumes entire risk as to use of this information. Further, this document does not amend, or otherwise affect the terms, conditions or coverage of any insurance policy issued by State Auto Insurance.

A formal maintenance program helps manufacturers avoid unexpected costs

LAC6530 — Fri, 22 Jun 2018 14:20:16 +0000

A formal maintenance program helps manufacturers avoid unexpected costs LAC6530 Fri, 06/22/2018 - 10:20

What causes equipment to fail? Here are some examples:

Power surges and electrical exposures
Air conditioning or heat related equipment, such as boilers
Technology
Solar panels, wind turbines and other alternative energy sources
Mechanical breakdown of your production equipment such as CNC machines - which can also occur from a power surge

How can you prevent equipment breakdown in your manufacturing business?

The best way to start is by formalizing your preventive maintenance program. Most manufacturing operations have some sort of maintenance procedures and schedule. How well they are documented - and followed - can vary.

Here are three tips that our risk engineering team has learned to be effective:

Make a list of tasks to be performed, including frequency, estimated task completion time, tools needed and who will perform the tasks.
Note the conditions while the tasks are being performed: Does the machine need to be on and functioning or shut off entirely?
List instructions on how to document tasks and results, as well as the contact person should an issue be discovered.

A formal maintenance program will help your bottom line.

Unanticipated repairs not only cost you financially, but also take time. If you have a preventative maintenance program in place, you can budget your costs as they relate to your equipment.

If something breaks down suddenly and needs emergency repairs, you may also pay a lot more for labor. Once your equipment has been repaired, overtime may be needed to get production back up to speed. Products may need to be expedited.

A preventative maintenance program may not stop catastrophic events from occurring. But it will ensure your equipment has a longer life cycle, reduce failures and can generate energy savings.

As an insurance professional, I'll add another reason to have a formal maintenance program - it might help you get better insurance rates. It will also help inform your discussion with your agent about what coverage you need in your insurance program.

This may be one of those "slow down to speed up" situations, but committing to a maintenance program will help you run at your most effective and efficient level. And, you can rest assured that you're going to get the most out of the complex equipment you've invested in.

Looking for more expertise on equipment breakdown and maintenance?

State Auto's partner, Munich RE/Hartford Steam Boiler, has an insightful blog related to equipment breakdown and how to prevent potential problems.

And, hopefully this is obvious, but this is another reason you need an independent insurance agent to help you work through your risk management program.

4 major risks in manufacturing

LAC6530 — Fri, 22 Jun 2018 14:16:03 +0000

4 major risks in manufacturing LAC6530 Fri, 06/22/2018 - 10:16

The manufacturing industry is booming, adding 29,000 jobs in just one month. But as we've seen insuring thousands of manufacturing operations, with the good comes the bad. Risk is a normal part of the manufacturing industry.

People working in manufacturing might face dangers every single day. Safety and risk management should always be top of mind so that both you and your company are protected.

From importing risk to dust exposure, risk management is vital to your company's bottom line. It's also critical for the people involved so they can stay healthy.

Foreign suppliers and importing risk

Importing goods from foreign countries bring challenges, like products liability exposure and uncontrolled inspection practices. There are political and environmental challenges with different countries and cultures. And, foreign currency exchange rates can change at any time.

While there are some U.S. resources in place to ensure the safety of goods, they're limited. You have to be extra vigilant when it comes to monitoring and protecting your products and investments.

1. Major machinery fails

Did you know that when a piece of machinery fails, it can be out of commission for weeks or longer? That means lost production time and the cost to repair or replace. The right insurance can get you back up and running so lost time and the impact to your business is minimal.

2. Product recall

We've all heard the horror stories of products being recalled after they've been sold in the marketplace. The costs can be huge - lost products and legal defense. Product recall (or product withdrawal) insurance comes in two main forms.

Product withdrawal expense pays for losses that directly affect the manufacturer. An example is the expense to pull back the affected product and cost to notify the public.

Product withdrawal or product recall covers losses to customers or others who are injured by a defective product.

3. Employee injury

Workers can be injured numerous ways: working on equipment, lifting and moving product. Asthma and dust exposures are also major risks with serious consequences. An injured employee may be out of commission for days or weeks, and sometimes permanently, leaving you with less people to get the job done. This can have a big impact on your production and delivery schedules.

This is just an overview. Each of these risks comes with multiple levels of challenges to overcome. Now that you've read this, the very next thing you need to do is review your insurance. Make sure you're working with an agent who knows the ins and outs of your business and can truly advise you on the best way to manage the risk in your manufacturing operation.

3 things managers in manufacturing must do to protect workers

LAC6530 — Fri, 22 Jun 2018 14:11:49 +0000

3 things managers in manufacturing must do to protect workers LAC6530 Fri, 06/22/2018 - 10:11

f you have experience with any part of the manufacturing industry, you know that keeping the workers healthy and safe is not just the right thing to do - it's critical to staying productive.

We've spent a lot of time looking at the conditions that lead to unhealthy or even dangerous situations for workers in manufacturing operations. In the insurance business, this is what we do - identify risk and how to mitigate and manage through it to keep businesses, well, in business.

Three areas here - if you're managing a manufacturing operation, you need to make sure you're aware of the best way to manage these risks to keep your workers and your business in good shape.

1. Strictly enforce protective equipment.

Whatever your employees are supposed to be wearing or using - gloves, glasses, helmets, masks, the right shoes, whatever it is - make sure they're using it.

This takes a real commitment and a conscious effort. You have to create a culture where it is unacceptable to go without these items. This takes time. It also takes more than a few posters or a single training meeting (not that these aren't excellent tools as part of an ongoing program).

Provide ongoing education, training and reminders to employees. This is crucial to help ensure safety is always top of mind. And, perhaps most important for truly creating a culture focused on safety, make sure your leaders are setting the right example. Management has to wear/use the right things and make sure the workers see it. No shortcuts.

2. Keep the risk of lung disease top of mind.

Safety accidents get a lot of attention, but a major cause of work-related illness in the United States is lung disease. Lung diseases are often caused by repeated and long-term exposure to chemicals, fibers, dusts, and other things often inherent to the manufacturing process.

Dust exposure and asthma are serious concerns for manufacturing workers. This has to be dealt with from two angles - both housekeeping and protective gear.

The right housekeeping measures are essential - things like proper ventilation systems, process to quarantine dust sources, and ensuring correct handling and removal of containers that include irritants.

And again, enforce the use of protective gear and respiratory equipment, including masks, at all times. And, have a documented process and follow it.

3. Demand safe equipment maintenance.

Insurance professionals are all too familiar with the problems that can be caused by half-hearted maintenance programs.

You have to have a formal program for maintaining equipment. This is critical for worker safety and for preventing things like fires that can cause major issues for people and the operation.

How you maintain the equipment is also a major factor. Machinery accidents are far too common. You absolutely have to make sure your workers are following lockout/tagout procedures every single time. When a worker performs routine maintenance over and over again, they may be likely to get too comfortable and circumvent a procedure to save time. Make it your priority to make sure this doesn't happen.

The absolute critical issues surrounding worker safety are yet another reason we work only with independent agents at my company. You need a team of people who are thinking about all these things and looking closely at your business with you to make sure your operation, and your people, are protected.

This article first appeared on LinkedIn Pulse.

What causes the most common work-related lung disease?

SIL6504 — Fri, 22 Jun 2018 13:57:58 +0000

What causes the most common work-related lung disease? SIL6504 Fri, 06/22/2018 - 09:57

Asthma can be more serious than you might think. It's usually recurring and long-term. The symptoms range from coughing to critical difficulty breathing that requires emergency treatment. Yet the risk of asthma is often not given the attention it deserves - perhaps because it seems more common and you don't often hear about the more serious effects of the disease.

Manufacturing workers are at serious risk of occupational asthma. People who work in manufacturing are exposed more frequently - sometimes daily - to the types of allergens and irritants that lead to occupational asthma. They're more at risk because they're breathing in things like fumes and vapors, dust, chemicals and powders. Even the powder from latex gloves can be a problem.

There are over 250 substances that could put people at risk. That's a lot. In an industry like manufacturing, we see the best approach as protecting workers from all types of dust or fumes they might breathe in. Those that take asthma seriously are protecting workers and their business. When your employees' health suffers, your productivity likely suffers, too. Asthma attacks can be so severe, the employee can't continue working. So yes, you want to protect workers because its' the right thing to do - but it's also a financial requisite.

The good news - it can be as simple as following the right procedures. Of course, it's not good enough to just create procedures; you have to make sure people are following them. Implementing safety measures has been shown to reduce symptoms of asthma even if workers have already been exposed.

If you're not familiar with OSHA's standards and guidelines, spend some time with this website about dealing with occupational asthma.

You can get more information about occupational asthma from the CDC and the National Heart, Lung and Blood Institute.

Occupational asthma is something we see too often in the risk management industry that can be avoided with the right steps.