US Liability – Why it’s so expensive for Canadian Businesses

Whenever I deal with companies that are starting out or expanding to the US, they are often taken aback by my initial warning about the cost of insurance in the US. For example, if a company’s business insurance policy costs $1000 per year for Canadian operations only, it would most certainly double or more once their product crosses the border. The issue is that Canadian firms exporting to the US have to be well protected for liability exposures that can cost significantly more south of the border. It doesn’t help that laws between states can vary – Canadian policies tend to be broader and more conservative – Your best interests¬†are ours too!

In this time of economic slowdown, the US market is attractive due to its sheer size – large customer base results in more potential for sales. As a Canadian manufacturer, exported, distributor, you should be aware of the follow:

  • Court Awards are typically much higher than in Canada – in cases where $1 million liability may have been enough in Canada, won’t be enough in the US
  • Product Litigation often ends up in a court with a jury who tend to be sympathetic to the injured party and distrustful of corporations/businesses
  • Often everyone associated with a product is listed as a defendant in an action – even if you are innocent, it will cost most to prove that
  • If the manufacturer of a product cannot be identified (I.e. comes from an overseas source) all known makers or sellers of a product can be named and held liable for damages based on market share
  • Their lawyers aggressively and actively seek out new issues and potential areas to litigate
  • Lawyers working for contingency fees are more prevalent in the US than in Canada
It is a completely different ballgame in the USA, and as a Canadian business exporting to the country (product or even yourself – i.e. professional liability), you are a prime target. While expensive, it is one thing you don’t want to cheap out on when doing business south of the border.
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