By Richard G. Randazzo, president, Invision
Wax has been used for centuries to remove hair, but that doesn’t mean your average user has made advances in applying it. Cosmetic depilatory wax products regularly cause serious burns and costly claims for cosmetics manufacturers, as any insurance agent serving the cosmetic industry knows. In product liability cases, claimants do not have to prove a manufacturer was negligent, only that the product was defective.
In many cases, cosmetic manufacturers can easily be doing more to protect themselves against claims, which often result from misuse and involve allergic reactions, chemical burns and heat burns. To prevent or mitigate the effects of these claims, agents have a role in both risk and claims management for their cosmetics manufacturing clients.
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When there are cosmetic product liability claims, many different factors will be weighed. From the strength of the package language to the documentation the manufacturer has on the product or container testing will all be considered. Helping your clients think from a claims perspective to better manage their risks is the best defense.
Here are three things to advise your cosmetic clients to watch for to prevent liability:
- Examine product labels. Manufacturers are required by the FDA to label their products with basic information, such as ingredients. However, the label does not have to be approved by the FDA before a product hits the market. This creates ambiguities in proper labeling practices. Many manufacturers believe they are complying with regulation, but may be wording product benefits or instructions in a misleading way that is left open to interpretation. That’s where you, the agent, come in. Review product labels and ask:
- Is there one set of clear instructions on how the product should be properly used?
- Is the language written in simple, clear language?
- Are there inconsistencies from one part of the label to another?
- Are the promises made on the package overstating the effectiveness, advantages or uses of product?
Simply put, you can best protect your client by making sure they adhere to basic regulatory standards and encouraging them to go above and beyond FDA requirements for labeling.
However, be careful not to put yourself at risk in this situation. Don’t lead your client to believe you are approving or “signing off” on label copy. To protect yourself and manage your client’s expectations, establish an understanding--perhaps even in writing--that you are not approving packaging copy. The agent shouldn’t turn a blind eye to poorly worded labels, but only a manufacturer is responsible for its product.
2. Keep thorough documentation for manufacturing, testing and packaging. Not only does this help keep operations safe, but it can also help a manufacturer to demonstrate due diligence in a claims situation. Documentation should include how product testing was done, what it was done on and whether it was done by an independent lab, as well as identifying information for coded batches. If there is a claim, this information helps your client make the case that harm was caused by operator error and not a product defect.
3. Properly prepare samples. Properly prepared samples are crucial and batch sampling and coding are the cornerstones of safe cosmetics manufacturing. Every single container of your client’s product should be stamped with a batch code. That code should be easy to find, consistent across all packaging and resistant to fading under normal use. It should refer back to at least 20 samples pulled from the corresponding batch of the product. If your client falls short in one of those areas, they are denying themselves a fair case if a user claims injury from the product. Samples provided by claimants are not a reliable test of whether or not the manufacturer is at fault.
More than a middleman
Your responsibility to your client doesn’t end with renewals or risk management. Agents should be proactive in assisting with claims management, engendering a positive relationship between the client and claims management professionals. Establish a relationship with a claims management company or third party administrator (TPA) that’s knowledgeable about cosmetics manufacturing liability insurance. Carriers handle myriad programs, but may have only one person handling claims. To provide the best outcome for your client, you want to work with someone with experience handling cosmetics claims.
As an agent, you are the anchor in the relationship between insurer and insured, and can involve the claim management company as much or as little as needed. Often, the in-house “claims person” (at both the agency and the insured) is multi-tasking, responsible for many things other than just today’s new claim. Be first to analyze potential potholes in the case, such as contract language, indemnification and insurance clauses, and incident documentation issues. This way you become a valued partner in the claims process, not just a middleman.
Establishing a “we” mentality in the risk management or claims handling process also helps put your client at ease. Because product liability claims are relatively uncommon in the cosmetics manufacturing industry, your client may not build a relationship with their insurer. When a claim happens, explain all three parties--agent, claims and client--are working toward the same cause.
Relationships are the foundation of the insurance industry. With a proactive attitude toward risk and claims management, you can prove your value to your clients, which will pay dividends in boosting your agency’s reputation.