liability insurance question

[Todd Mosley]

I'm a lawyer, I'll try and answer some of the legal issues brought in this thread. I am licensed in TN only, and can only speak about TN law. Laws will vary state by state.

I've got one frame under my belt, which will be a bike I ride so if it fails, I probably won't sue myself. I want to start building more, nothing serious, hobby stuff, maybe a frame or two a year, but I don't have a particular need for that many bikes. Recently suicideking made a post about his first frame and giving it away at a local race which sounded like a cool idea.
I've considered doing something similar to help raise funds for various local cycling org's - however, there has to be some sort of liability issue with doing this...

There is liability if you put a product in the marketplace and the product fails, and someone suffers injury as a result. You could be on the hook for medical bills, pain & suffering, property damage, etc. In TN, you don't have to be found negligent in making the product - you are held strictly liable. If the product failed as a result of design or production defect, you're on the hook.
However, this applies to manufactures and sometimes reseller. If you aren't in the framebuilding business, you may not be liable.

Has any small bicycle maker / framebuilder ever been found to be at fault due to negligence in a court case involving injury to a user of their product?
I ask because I'm struggling to see how a basis for action could arise if you are applying your craft in an expert manner.

I once represented a family in a wrongful death lawsuit because an ambulance driver, for whatever reason, swerved into a tree, the gurney came loose after the collision, and the patient sustained a head injury. The patient was in a coma from her injuries and later died when life support was removed. We sued the City (they operated the ambulance), we sued the ambulance maker, and we sued the company that made the part that secured the gurney to the ambulance.

Lets say a cyclist is killed after colliding into a tree during a cyclocross race. The race had you sign a waiver so they probably won't get sued, or they will at least be able to get dismissed from the suit with minimal cost. Afterward, when examining the bike, it clearly had a catastrophic failure of the dropout. However, just from inspection, it's impossible to say whether the failure caused the wreck or the wreck caused the failure. The company that made the bike gets sued and the compan(y)(ies) that made and/or designed the part get sued. Both sides have to hire experts to give an opinion of what caused the failure. You, the framebuilder, must pay an expert $10,000 to give an opinion. You must also pay to defend the suit. To get to the stage of a suit where you can settle could cost you $10,000 alone in attorney fees.

If you had insurance for the covered the loss, you'd be out whatever you're deductible is.

Folks can sue you and you have to defend yourself, whether there is merit to the suit or not. The cost of defending yourself can become debilitating to a small business very quickly, and unscrupulous folks prey on this. Being insured covers you, but only beyond your deductible, which in most cases gets eaten up in the legal fees necessary to merely respond to a complaint.

Here's a real example: Builder gets sued by a rider that built up one of their frames as a fixie with no brakes, rides it onto a beach pier where bike riding is prohibited, at night, drunk, with no lights in an organized hipster event called "storm the pier". She plants her front wheel between the boards on the pier, goes over the handlebar, and subsequently sues said builder for producing a defective product. Builder's $5K deductible is consumed just in the legal fees to respond, since the suit was filed in a different state. Insurance company unilaterally (yes, they can do this) decides that it is less expensive to "settle" than it is to litigate, and subsequently pays the rider a five figure amount, which then becomes a "recordable" incident against the builder, leading to higher premiums. Nice system.

Insurance sucks, but it is a necessary evil in a litigious society that allows BS claims in civil court, and yes, it occasionally benefits honest people injured through no fault of their own.

All very true. You also raise another important issue. You live in one state, but you've sold frames in all 50. Potentially you could be defending suits in any of those states. All with their own different tweaks of product liability law and statute of limitations.


If you are sued in Tennessee, the statute of limitations doesn't expire until 10 years after you've made the frame. Every state may have something different. You need insurance that covers a loss for whatever is the longest statute of limitations in the country. You're insurance company won't pay for losses that you aren't legally obligated to pay, so it will likely know how long a lookback period you need coverage for. Ask your insurance agent for advice on this and get it in writing. If they tell you the wrong answer they could be liable for malpractice.

So, what can you do to limit losses?
1. Don't sell frames.
2. Carry insurance.
3. Operate as a corporation or LLC.
4. Stamp "prototype" on the frame and have the consumer sign a liability waiver.

[Mark Kelly]

4. Stamp "prototype" on the frame and have the consumer sign a liability waiver.

This is very interesting point. How does it work?

At the moment I'm in a bind - I can't sell anything because I can't get insurance. I can't get insurance because when I say "new" to an insurance company they hear "unknown potential liability".

If I go back to them with independent Euro Norm certification I can probably get them to talk turkey. To do this I need to make several prototype frames and to fund it I need to sell some of them.

Just for the record: I trained as an aeronautical engineer and have a good deal of experience in industrial QA. I will be testing everything myself before thinking about selling anything but certified testing costs real money.

BTW Todd: You didn't answer my question. I understand how such a liability can arise in your crazy justice system, I wanted to know whether it actually has.

[Todd Mosley]

Hire a lawyer to draft the waiver - do not do it yourself. I have no idea if a bike manufacturer has been sued and found liable. Lawsuits usually settle and the public is not privy to the details. The more important question is whether it can happen to you. It can.

[CWinters]

So if I understand this thread correctly: If I, as a hobbyist, build some bikes and give them away/ donate them, no money exchanged, I am then still liable for any potential injuries incurred on said bikes for the rest of my life, and would therefore need to maintain a $1,500/yr+ liability insurance policy for as long as I live, unless each bike recipient signs an attorney-crafted waiver? That is tough. But I had a feeling it was something like that. I wonder how many fledgling builders and hobbyists are aware.

[Todd Mosley]

As for liability, you need to look at the laws of your state as to whether a non-commercial frame-builder is liable for a product liability case. The laws applicable to you may say that if you don't sell frames, you're not liable. But, your client can still file a lawsuit and allege that you are really a business and subject to liability. It may cost you $20,000 in legal fees to argue that point in court, fees you will not be able to recover even if you win. Proper insurance would pay for that defense. If you are not in the frame-building business, an umbrella policy, Umbrella insurance - Wikipedia, the free encyclopedia, might be sufficient. Ask the agent of your homeowners or car insurance.

[CWinters]

Yes. I guess bottom line is that you do not want to be in a situation where you're sued in the first place without insurance. Around here, there is a culture of beginners and hobbyists building frames for people in exchange for cost of supplies very early into their learning process. Unfortunately, I do not believe that either party understands what risks they are exposing themselves to with these exchanges.

Re umbrella insurance, remember that with many of the younger builders there isn't necessarily anything to put under that umbrella. They do not own their own home or have a car.

[e-RICHIE]

Around here, there is a culture of beginners and hobbyists building frames for people in exchange for cost of supplies very early into their learning process. Unfortunately, I do not believe that either party understands what risks they are exposing themselves to with these exchanges.

Re umbrella insurance, remember that with many of the younger builders there isn't necessarily anything to put under that umbrella. They do not own their own home or have a car.

Agreed - and even trying to have a conversation about it often parts the room. Some don't realize that we are all new, and young, once. But that doesn't relieve you of responsibility or minimum standards. I was the same way as a 24 year old and wondered what the fuss was about. But my first ever landlord - an insurance agent by trade - was aghast that I would do any of this work and remain uncovered. His points of view got into my head early and I bought a policy post haste (that's Latin for yesterday...). More than most, I get the rebellious I'm not giving my money to the man, especially since I have no money to give sentiment. But that shit don't fly when someone who rode your bicycle now is having lunch through a tube, can no longer work, or similar.