Canadian Underwriter

Three product ingredients that could cause large claims

September 13, 2018   by Greg Meckbach

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If your client makes or supplies beauty care products, they could face bodily injury lawsuits if certain chemicals are present.

The “toxic trio” – dibutyl phthalate (DBP), toluene and formaldehyde – are contained in some nail varnishes, body lotions, fragrances hygiene products, Allianz Global Corporate and Specialty warned in a report released Wednesday. “DBP is likely a reproductive system toxin, toluene a neurotoxin and formaldehyde a known carcinogen.”

Small beauty salon shops could face the risk of lawsuits if they “don’t really care what product they are using,” said Wolfram Schultz, AGCS’s Munich-based global practice group leader, heavy industries and manufacturing, in an interview Thursday.

Although small salons are not part of AGCS’s target market, manufacturers and other firms in the supply chain are also at risk of lawsuits, AGCS notes.

“Unlike DBP and toluene, formaldehyde has been the subject of product liability lawsuits,” according to the report, Emerging Liability Risks: The “Toxic Trio,” which was published by AGCS and Los Angeles-based risk modelling firm Praedicat Inc.

“Consumers have grown increasingly aware of the risks posed by cosmetics ingredients and expect manufacturers to avoid using potentially hazardous ingredients,” AGCS noted.

A manufacturer faces liability risk if it assumes its products are free of DBP, toluene and formaldeyheyde but it turns out they are not, Schultz told Canadian Underwriter.

Consumers and workers could sue manufacturers alleging they got sick as a result of being exposed to such products. Plaintiffs could ask courts to award costs for medical care and income replacement as well as non-economic damages, also known as pain and suffering.

Commercial general liability insurance could cover defendants’ costs. But your client does not just need coverage if plaintiffs are awarded damages. The client needs coverage to defend itself even if the defendant is innocent, suggested Alfred Henneboehl, global practice group leader, liability at AGCS, in an interview Thursday.

“Good product labelling and information about possible risk is key to avoid liability,” Schultz said.

Nail varnish and other personal care products “are used by children, teenagers and adults on a near-continuous basis,” AGCS warned in the report. “Furthermore, the most severe adverse health effects of these products can have long latency periods and might not become clear for many years.”

One reason AGCS released the report is to help clients to avoid possible risks and alleged claims, Schultz said.

In addition to liability risk, cosmetics vendors also face the risk of loss of income in the event of a product recall.

“Manufacturers would have to recall all the implicated products and then consumers could file lawsuits accordingly, alleging fraudulent marketing and related claims, including medical monitoring,” AGCS said.

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