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Do people sue very small skincare businesses for skin damage?Posted by Zink on June 11, 2018 at 6:14 pm
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?Microformulation replied 4 years, 11 months ago 10 Members · 22 Replies
GuntherMemberJune 11, 2018 at 7:02 pm
Even if “just” 0.001% of customers sue
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.
MarkBroussardProfessional Chemist / FormulatorJune 11, 2018 at 7:14 pm
I have a client who was threatened with a lawsuit by a consumer who claimed they were “burned” by my client’s Hyaluronic Acid Serum … the product only contained Water, Sodium Hyaluronate & Preservative.
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.
Dr Catherine PrattMemberJune 11, 2018 at 10:14 pm
I have always been told to get insurance just in case. It may not actually be the cream they thought they were buying. I sent a cream to a lady who is very allergic, so I thought I sent her the fragrance free cream, but it was orange blossom. Luckily she smelled first, but is an example of what can go wrong I guess!
BelassiMemberJune 11, 2018 at 10:45 pm
Limited Company with £100 capital. Then you point out to the person wanting to sue, that you can simply put the company into liquidation and they will be left with the lawyer’s bills.
Dr Catherine PrattMemberJune 12, 2018 at 1:57 am
ZinkMemberJune 12, 2018 at 7:05 pm
All the products have disclaimers and advise patch testing, but who knows what protection that gives. OTC products have FDA mandated warnings as well.
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.
MarkBroussardProfessional Chemist / FormulatorJune 13, 2018 at 10:53 am
Any person with a lawyer can sue anyone at anytime over virtually anything. Obviously, you have already have made up your mind that you don’t want to get insurance and are looking for some reason/comfort to justify your decision.
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.
em88MemberJune 13, 2018 at 10:59 am
Isn’t pharmacovigilance to report problems / side effect for a product?
OldPerryProfessional Chemist / FormulatorJune 13, 2018 at 4:27 pm
Insurance is just the cost of doing business. I recommend that if you are serious about your business then you should get insurance.
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.
ZinkMemberJune 14, 2018 at 9:11 am
So Mark you’ve never heard of it happening, and Perry?
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.
OldPerryProfessional Chemist / FormulatorJune 14, 2018 at 12:29 pm
I don’t keep up on all the goings on in the US court system & this isn’t the kind of thing I generally ask brand owners about. So no, I’ve not heard of any. However, this should not give you any reassurance. It could happen all the time or never as far as I know.
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.
GuntherMemberJune 14, 2018 at 2:03 pm
How much does product liability insurance typically costs and how much can it cover?
MarkBroussardProfessional Chemist / FormulatorJune 14, 2018 at 4:27 pm
“Another way to phrase the question - how big do you need to be before you really need insurance?”
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.
DavidWMemberJune 14, 2018 at 4:48 pm
Even if it has never happened to anyone it can happen to you. I would suggest getting insurance. One frivolous suit can put you out of business.
DuncanMemberJune 15, 2018 at 9:19 am
Insurance means that if you get somebody litigating, even unjustifiably, it’ll pay to waste a lawyers time not yours
ends up being very cheap then
Dr Catherine PrattMemberJune 17, 2018 at 2:18 amHey Bellassi, (this is fom a few posts ago in this thread)You were interpreting that I had a ‘Limited Company with £100 capital ‘, I don’t think so I had a million dollar (no thats too 80’s) I had a billion corporation and then turned to my mate Warren Buffet and played around with a few investments. Now you can continue what you were sayin?….
Dr Catherine PrattMemberJune 17, 2018 at 2:31 am
I haven’t got insurance yet this year, however, now hearing all this, I dont think I will. I have a knew product out and if someone sued me now (Belassi) I have a less then $250 business, and I would let the lawyer know that. The problem is that small businesses pay a lot of money on advertising, branding etc to make them look like a brand that looks like Lancome, and could be sued as they have loads of money.
ZinkMemberJune 24, 2018 at 7:40 pm
@Perry thanks for the input, interesting to know that some lawyers are suing due to false organic claims! Hopefully this doesn’t apply to mentioning that some ingredients are organic :#
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.
GuntherMemberJune 26, 2018 at 1:33 am
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.
MicroformulationProfessional Chemist / FormulatorJune 27, 2018 at 5:31 pmI will weigh-in as well. In my experience, your liability and exposure are directly related to your visibility in the Market. At first, you will be small enough to avoid any real enforcement actions (unless you are reported or make Drug claims) but at some point, you will hopefully grow large enough to command some attention. This is where product liability becomes more important. As such, I always tell my clients to do it right from the start.As the Formulator, you have limited liability as this rests upon the distributor (this is backed up by the FDA and a Regulatory person I spoke with). There could be a case where they could attempt to breach this exemption but again it is unlikely. As such I would be more cavalier in such a scenario.
Dr Catherine PrattMemberJune 28, 2018 at 12:07 am
As the Formulator, you have limited liability as this rests upon the
distributor (this is backed up by the FDA and a Regulatory person I
spoke with)Why is that? as we are the ones that could mix the wrong ingredients?
MicroformulationProfessional Chemist / FormulatorJune 28, 2018 at 1:50 am
That is why we use GRAS ingredients at proper levels and recommend testing. As for the question, that is simply the interpretation under US Civil Law. Somewhere on my server, I have the letter from the FDA stating as much. The Regulatory Person is well known and he mirrored the same answer at a seminar I attended.