Do people sue very small skincare businesses for skin damage?
Zink
Member
I'm wondering how common law suits are in skincare and if people bother to sue tiny companies. Say you're selling a 2% salicylic otc anti acne formula, which could cause some redness and peeling, or a product with an natural ingredients that could cause allergic reactions in rare cases. I'm sure most products can cause problems for some small percentage of people.
These examples seem quite low risk compared to selling say 70% glycolic acid peels.
I'm well aware that large companies get sued, but haven't heard of this happening much to tiny ones since there's not much money to take from them in the first place. Perhaps someone would ask to get dermatologist bills reimbursed, but that likely wouldn't cost much compared to the cost of insurance. Another way to phrase the question - how big do you need to be before you really need insurance?
These examples seem quite low risk compared to selling say 70% glycolic acid peels.
I'm well aware that large companies get sued, but haven't heard of this happening much to tiny ones since there's not much money to take from them in the first place. Perhaps someone would ask to get dermatologist bills reimbursed, but that likely wouldn't cost much compared to the cost of insurance. Another way to phrase the question - how big do you need to be before you really need insurance?
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and "just" 0.00001% win the lawsuit, you're ruined.
So even if you're not making high-risk cosmetics:
you can add a disclaimer like:
'test in a small area for 48 hours before use, if irritation' happens, do not use'
You can get plenty of disclaimer ideas from commercial hair dyes.
At the end, the disclaimer just takes some extra time when designing your labels, and no extra cost.
The answer to you question is: Anyone who can convince a lawyer to file suit against you, may do just that ... the attorney's figure that you have product liability insurance on your products and they're looking for money from the insurance claim more than damages if you are a small firm.
See website for details www.desertinbloomcosmeticslab.com
Thing is I've never heard of any small biz selling relatively low risk products getting sued so I wonder if this insurance thing really is necessary. I've heard of customers getting allergic reactions, but people have been happy to get their dermatologist visit covered. So I'm asking here to see if there are any "case studies".
It doesn't make sense to sue a small business like this as you're likely to get stuck with a lawyers bill and no money. You don't get ruined if there's not anything to ruin and it's a limited liability company.
For personal formulators you can get very cheap insurance, but it's a bit more for businesses starting at around $1400 regardless of sales numbers.
So, here you go: No, you don't need insurance. I, for one, have never, ever heard of consumers suing a small skincare company because consumers know they're likely to get stuck with a lawyers bill and no money. And, on top of that you won't get ruined. Don't waste your money buying product liability insurance.
See website for details www.desertinbloomcosmeticslab.com
But as @MarkBroussard says, it sounds like you've made up your mind to not get insurance and are looking to justify that decision. It's a risk & without it you can't sell in a lot of possible distribution channels. But if you're just running your business as a hobby and have little interest in building it up, you might think the money saved is worth it. I don't.
It seems like you are in the opposite camp trying to justify having insurance as you currently do pay for it and assuming I don't have it (I do). But everyone will try to sell you insurance for everything in the US, so it's reasonable to evaluate the actual risk, especially if you're small/just starting out etc.
I’ve heard from a couple of brand owners (small) who have been sued for their claims about their products being organic. They chose to settle out of court which cost them thousands of dollars.
This is a strategy some lawyers use to make money. I could easily see them adapting the strategy to small, uninsured companies.
I’m curious, how much money are you going to save by making a risky decision like this?
In truth, I bet there are lots of people who sell stuff on Etsy or at Farmers Markets who don’t have insurance. I think that’s a bad idea.
If you manufacture/sell skin care products that consumer put on their skin, you'd best have insurance, even if you are small. It is simply a prudent business decision, and as Perry pointed out, without insurance many distribution channels will not even think of carrying your products.
As I mentioned, one of my clients was threatened with a lawsuit with the claim that the consumer suffered burns from a Hyaluronic Acid serum ... that's like claiming you were burned by water. But, the consumer saw "Acid" was in the product and there you go ... a potential lawsuit over something that is simply impossible to have occurred.
@Gunther: The cost of product liability insurance depends on the product and it's likelihood of causing adverse reactions. An AHA-containing product will cost more to insure than an all-natural moisturizer for instance.
See website for details www.desertinbloomcosmeticslab.com
ends up being very cheap then
Doesn't seem like it's a risky decision me, if it's at the level of risk as being struck by lightning. Although if you're making an inherently risky product it seems more worthwhile - doubt you'd get sued for selling petrolatum.
@Gunther if you're a sole formulator maybe $500/yr a small business maybe $1500 minimum. Coverage is complicated, but up to a million or two total.
Another pertinent question here: If you did get sued and suddenly owed more than you could pay, does that mean your business is automatically bankrupt? I don't think so although you could probably lose it's liquid assets fast.
I don't think the question of whether to get insurance or not is black and white, but it's value goes up with revenue x risk factor of products. It's an interesting question for sole formulators and small businesses.
but another judge can sometimes rule the company can remain on business,
pay a relatively small lump sum up front
and a continuous percentage of percentage of profits or revenues, even if it would take 500 years to pay the awarded amount in full.
Not a legal advise:
Depending on your country laws
the registered legal representative (not necessarily the CEO or director) can get his personal assets forfeited even if he owns little or no company' stocks.
Just for fun
watch The Simpsons episode where the nuclear plant legal rep is a canary (yes, a bird) and not Mr. Burns as expected.