In Depth
Product liability law holds the companies that make and sell a product accountable when a defect in it injures someone. Courts usually sort defects into three kinds. A design defect means the product was dangerous the way it was meant to be built, before a single unit came off the line. A manufacturing defect means the design was sound but an individual unit was made wrong. A failure to warn means the maker never flagged a risk that a user could not reasonably have spotted alone.
Product liability differs from an ordinary negligence claim because much of it runs on strict liability. The injured party usually does not have to prove the company was careless. They have to show the product was defective and that the defect caused the harm. The reasoning is a policy choice: between a consumer who was hurt and the business that profited from selling the product, the law puts the cost of defects on the business.
Liability can reach anyone in the chain of distribution, from the manufacturer down to the wholesaler and the retailer who made the final sale. Which of them is actually on the hook, and under which legal theory, differs from one jurisdiction to the next.
What It Looks Like
A company sells a countertop appliance with a wiring flaw that lets it overheat. One unit catches fire and destroys a customer's kitchen. The customer sues. They do not need to show the manufacturer was sloppy, only that the appliance was defective and that the defect caused the fire. The manufacturer, the distributor, and the store that sold it can all end up named in the suit, each left to argue over its share of the blame.
Why It Matters For AI Vendors
Product liability is one of the oldest and broadest exposures a business can face, and it does not behave like most other coverage. Because it can run on strict liability, a company can be made to pay for harm even when it acted reasonably at every step. That makes a worst-case loss hard to predict and easy to underestimate, which is why insurers treat product liability as its own line of risk rather than something quietly bundled into a general policy.