liability insurance question

[veryredbike]

Thanks! I'm ages away from it being relevant to me personally, but I'm always fascinated by that sort of thing!

[Mark Kelly]

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.

[datas_brother]

Mark, from my standpoint there are 2 main reasons why I have insurance:

first and most important, customer protection. Nobody is perfect. If you make a mistake you need to do everything you can to make it good. If there is personal injury (or worse) involved you can't make it good but you can at least make sure the person and their family aren't financially ruined by it. Insurance gives them the money they need to pay the doctor, compensate for loss of a paycheck during recovery etc.

Second is for the protection of yourself and your family. Unfortunately we have become a society of litigators. If you do something stupid like the girl that fell into a manhole because she was texting while walking, you don't slap yourself for being stupid. You ask "who can I sue?" If your customer takes his road frame down a single track and it breaks, he only needs a good lawyer and a sympathetic jury to get millions. No insurance means you pay out of pocket (or chapter 13). In the states, courts award ridiculous sums, which is why insurance premiums are so high. In Germany you get what you lost plus pain and suffering so cases seldom go beyond a few hundred thousand Euros. That's why my premium is less than 25 % of what has been quoted here.

So, in a perfect world where everyone take responsibility for their own mistakes and you the tradesman don't make any and you see every material defect before using the part insurance may be less relevant. In the real world there are too many variables beyond your control and not having insurance is the equivalent of gross negligence.

[Mark Kelly]

Yes I get that, I liked Andy Stewart's take that it's to help your client not to protect yourself BUT...

The basis of civil action is negligence. Again, I ask, has anyone in this trade ever been found to be at fault due to negligence?

[sam]

There is always a common answer I see when someone ask about getting insurance to protect themselves, the answer is it is to protect your customer. Of course the first thing we should all do is provide a safe product, but even the best products sometimes have something happen and when it does you need to protect that customer.
But lets not forget that the majority of time you will get sued will not be because of a failed product you built, it will be for many other reasons that the lawyers or insurance companies decided to drag you into, in there umbrella style of litigation. Did you support a race or ride or charity event and someone got hurt on a product you do not sell, you may get sued as a sponsor of putting on the event. Did a quick release fail on a complete bike you sold, even though you did not build the QR, you will most likely get sued. many many other examples in the bike industry. So we have to protect our selves just as much.

also insurance is not an enabler to build a bad product and want to protect yourself, a high quality product needs to come before customers

[e-RICHIE]

There is always a common answer I see when someone ask about getting insurance to protect themselves, the answer is it is to protect your customer. Of course the first thing we should all do is provide a safe product, but even the best products sometimes have something happen and when it does you need to protect that customer.
But lets not forget that the majority of time you will get sued will not be because of a failed product you built, it will be for many other reasons that the lawyers or insurance companies decided to drag you into, in there umbrella style of litigation. Did you support a race or ride or charity event and someone got hurt on a product you do not sell, you may get sued as a sponsor of putting on the event. Did a quick release fail on a complete bike you sold, even though you did not build the QR, you will most likely get sued. many many other examples in the bike industry. So we have to protect our selves just as much.

also insurance is not an enabler to build a bad product and want to protect yourself, a high quality product needs to come before customers

As should a body of work - or a few limbs at least.
It's remarkable how many folks are finding a market and
getting paid for work when they've produced so little.

[GSmith]

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.

[WadePatton]

and you gotta 'member this: where your customer may be a great and noble person who would never consider suing any craftsman, if something happens, it may be his survivors or his blood-thirsty BIL with a fresh JD who comes after you.

Ins premium buys you a lawyer up the to the limits of your coverage. best case: Sloughs off the frivolous, and pays if you screw up.

Also covers your shop and tools and undelivered goods not covered otherwise.

It's not their fault that i've paid up 2 years and never sold chit. time is coming.

[afwalker]

Update on Liability insurance:
My local agent couldn't bundle so sent me to Westlake for the NIPC policy annual sales 20k, policy was right at $1750. They took $8 off when I declined Terrorism insurance for my metal shed in the backyard in Southern Missouri. Easy to work with there at Westlake, just took a while to get through the process.
cheers
andy walker

[e-RICHIE]

Update on Liability insurance:
My local agent couldn't bundle so sent me to Westlake for the NIPC policy annual sales 20k, policy was right at $1750. They took $8 off when I declined Terrorism insurance for my metal shed in the backyard in Southern Missouri. Easy to work with there at Westlake, just took a while to get through the process.
cheers
andy walker

Bravo welcome to the cabal.

PS I always opt for the data loss rider - I have had hard drives go down and the retrieval
costs are high. VERY HIGH. But the coverage made it pennies on the ten dollar bills.

[Too Tall]

Could this thread go into the framebuilders wiki?

And somehow pop up next June?

B

Good idea. Done.

[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.

[TomW]

I'm having a slow day at work and stumbled across this old thread and thought I would chime in because I am also a lawyer and we love showing how fabulous we are. Though seriously, Todd's advice is very sensible, and I can't really add to it. However, I am coming at this from a UK angle rather than a US angle so it might also be interesting as it brings out slightly different factors.

Everyone has so far being talking about negligence and potential statutory liability for defective products. The thing to realise when a framebuilder sells a bike to an individual is that they also enter into a contract. Contracts often (and definitely in England) can come with implied obligations. In England if you sold a fixed wheel bike without brakes to a person knowing they were going to ride it on the street you could be liable if they crash due to lack of brakes as it has to be "fit for purpose". This is because according to England's road laws you need two breaks to ride a fixed wheel on the street.

Another very important point Todd makes is that you can be liable when are being a good person. Say you are a learning hobbyist and you build a bike for a friend for free. The fact that you give it away or they simply give you a beer in return does not exempt you from liability. You still have to build the bike non negligently. You can't hand over a death trap and go "your problem".

One interesting point some have also raised is does a framebuilders' liability run forever and apply in all circumstances? Well, the simple answer is no but it can get complicated. Essentially your obligation in a framebuilder-to-indvidual relationship is to deliver a bike fit for purpose and at a level of competence that one would expect from a framebuilder at your level. If even Mr Sachs' frames are likely to fail after 25 years of riding next to the sea (salt water and corrosion etc.) and your frame fails after similar use... so be it. Similarly if Mr Garro builds a bespoke lightweight racing frame for a 50kg girl and a 200kg guy gets on it for a joke and does mountain biking on it... well that is probably going to be their problem and their pain. In both situations it is not likely to be negligence or breach of contract. However, as Todd mentioned the costs involved in establishing that can get complicated and your outcome is never certain. Hence insurance.

As a litigation/ arbitration specialist myself, my one personal rule is never ever get involved in a dispute. Thus insurance, having a well drafted waiver and doing your job competently in the first instance are key.

If you are a small builder and you can get away with it with your customers, I would make sure you have a good waiver saying at a minimum that the bike was built for the individual at tolerances fit for them only, it is warranted for 5 or 10 years use, and your liability for any losses due to it are limited to [USD...]. You may be able to exclude death and personal injury elsewhere in the world but can't in England & Wales and a fair few European countries.

Ok, this will never be read as the thread is half a year old and it is time to go home.

[MrkiMedo]

Does insurance usually cover international sales?