Question for Vendors and Fabricators

[MoparNorm]

I'll post this question here since I'm not a paid advertiser and cannot post at the Commercial Vendors Forum.
Any and all answers would be appreciated and if you wish to remain anonymous that is OK also, for obvious reasons.
I have several products that I am begining to fabricate for the Sweptline trucks. The problem is that these products are limited in overall demand, but very much in demand for the Sweptline owners, and as such they are not great money makers, in fact they may be a break-even proposition at best. That means that the current cost of product liability insurance is prohibitive. $20,000 per year insurance cost, on $45,000 gross sales, doesn't take a rocket scientist to figure out that there isn't a future in this, beyond the love of these trucks. I'm sure folks like Ray at Helitool already know this fact. So the question begs, what do you guys do to cover the insurance overhead? Do you run 'naked' without insurance? Are there other options? CA allows product disclaimers, but what if I sell outside of the state and who would want to take that chance? Beyond the 10 year task of first killing all attorneys before starting production what have you guys done? If you are afraid of public attention please feel free to e-mail me. All correspondence will be kept in strictest confidence.
Thanks!
MN

[Gordon Maney]

From what I can see, broadening this to the larger market of small business people producing parts/accessories that could be regarded as having liability exposure [which encompasses almost everything], yes, quite a few have no insurance.

You need to understand that even if you find a fabricator with liability insurance, that does not relieve you of the potential need for it. Both of you will be named in the suit.

Also, even if, rationally, the liability exposure is minute, even if it is highly unlikely that a judgment will be brought against you, that hardly matters, as you will still have to bear the costs of your defense, which could be substantial.

I know there are some manufacturers/sellers of motorcycle accessories who try to get past this issue by saying their parts are for display purposes only. Somehow I suspect that would not last long in court.

I think these issues you raise are a very big problem in this country. I think there would be a lot more small business if these risks and associated costs were not so prohibitive.

I have considered and abandoned plans for a variety of things, precisely because of all of this.

Certainly if you are thinking about hinges for the glove box lid [contrived example], your liability exposure would be less than if you were going to sell steering linkage parts, but there is lot of gray in between where you could get really hurt financially, even when you did nothing wrong, just in defending yourself.

Keep as much of this discussion here as you can, as I think it is of interest to all.

[HWooldridge]

Gnarly subject at best but the reality is that quite often people run with nothing and take the chance. If something does happen, the lawyers go after the deep pockets so havng a lot of insurance is probably a bad thing. Unfortunately, as Gordon stated, you will have to defend yourself and that may cost a great deal of money. I used to build large volumes of forged and fabbed products for the craft industry and have pieces I made all over the world (I know because I've received letters). I did not carry any type of liability insurance at that time. My agent for homeowner's found out and had a cow so I ceased operations. I also agree with Gordon that the type of product makes a difference. An individual welding on ultralight airframes has a Pandora's box of possible liability compared to someone making woven grass baskets. I am not a lawyer but I believe forming an LP or LLC might protect you to some degree. Your fabrication equipment could be the company assets, like a welder, lathe, etc., which you might lose in a lawsuit but better that than all the rest. It also might be best to lease a building and put it all there rather than have it as part of your garage at home.

[MoparNorm]

Hi Gordon,
Yes, I hope that all of the discussion would be here, I only mentioned the e-mail option in the hopes that someone who will not post because they wanted complete anonminity could contact me in that manner and not risk someone guessing their identity.

Going into this deal I assume that very few will actually have insurance, I am hoping that some have found a way around it but having been in business for over 30 years I know that there is little that can be done. Even group or association policies are not that great of a discount. I have carried several million dollars worth of liability in the past, I have been incorporated, I have never had a legitimate claim, but it seems that once you are known to have "deep pockets" the rats come out of the woodwork, I have been sued many times.
Incorporation does little to protect you. Any slick attorney can and will pierce the corporate shield in a matter of days. As an idividual officer of any corporation you are now required to personally indemnify insurers, bonding institutions, banks and others . The corporation is nearly worthless as a source of protecting personal assests, home and property. It is no longer a real tax advantage either. The issue is quite frustrating when you think that the only reason for the high rates are not sloppy workmanship, but the thousands who ,spurred on by underworked attorneys, tried and suceeded in getting something for nothing. True legitimate injuries and claims are so rare that the rise in coverage cannot be explained by actual damages alone. Three years ago I could have received coverage for $1,500 per year, not great for only $20,000 of profit, but not the rediculous $20,000 quote I recently received!
Everyone wants the best possible product for the price, but how can one justify selling a $500 product for $1,000 simply to cover overhead, when all you will get from it is grief from folks posting on the various forums crying about high prices? I specifically think of Dave and Ray, struggling to make a good product, against nearly all odds. And yes Gordon, you hit it right on the head, the most requested parts for Sweptlines are Headers, Power Steering and Disc Brakes.
Thanks for your input, I hope to get more.
MN

[Gordon Maney]

One possibility that fits with Hollis' comment, is on the end of a spectrum where you are not currently, and likely cannot go. That is the person with no assets.

I had an attorney once tell me that there is a class of individual who is essentially suit proof, and that is because they have nothing, and cannot have their tools or their domicile taken from them. I suspect you are past that.

I admit to the fact that it bothers me that carnival workers, figuratively speaking, could enjoy a coincidental protection that we could not.

Also, what do you mean by headers? You mean exhaust headers?

[MoparNorm]

Unfortunately, or fortunately as the case may be, I am past the point of even being able to declare bankruptcy, I have several partnerships that would preclude that. It seems as thought the bravest capitalist we have in our country right now are the new immigrants that have nothing to lose and see our country as an incredible oportunity when compared to the situation that they escaped from.
Yes, exhaust headers.
MN

[MoparNorm]

It would appear that the majority of our fabricators have nothing to say. I don't know if they are too busy or too afraid to comment? I had hoped for a better response, no wonder the small fabricator is un represented! No voice, no action, no action, no cure?
Anyway, if no-one wants to say anything in the defense of our trade, can anyone at least tell me who they use for their insurance carrier?
To say that I am disappointed in the response from those I have e-mailed is an understatement! I guess we are all making our parts in secret in our garages??? My tongue, is not too far into my cheek...
MN

[Gordon Maney]

I would make inquiries with independent insurance agencies who insure businesses. I have made use of such in the past, when I was doing work that I felt had liability exposure.

[MoparNorm]

Hi Gordon,
Thanks, that is what I have been doing. I am hoping that someone who specialized in manufacturing aftermarket automotive may have better rates. There are no quotes under $15,000 per year so far. I even tried SEMA. Frustrated but plugging away.....
MN