It might be unimaginable for a company who is in business for leasing out equipment to others to need insurance coverage for product liability. The company also buys the equipment that it generates income from. However, clients dont see it that way. What they do understand is that a company who leases out equipment impliedly guarantees that the equipment they do lease out is fully functional and safe to use.
If an accident happens because the equipment overheated or malfunctioned, the lessee will likely claim for damages.
This scenario highlights the importance of a product liability insurance that covers the business activities of a lessor. Most, if not all lessors, lease out electronic equipment such as strobe lights, projectors, smoke and bubble machines and other paraphernalia that are often used to hold special events. These devices have the tendency to overheat, malfunction or explode, causing injuries to the users, and to bystanders as well. It could be dangerous and may become an extravagant affair.
Due to the disaster the defective equipment could create an embarrassing or upsetting situation that arises from such an event, the lessor is likely to face a damaging lawsuit.
When this happens, a lessor who is protected with a product liability insurance need not worry. Proceeds of the insurance can pay for the claims stated in the lawsuit.
The cost that a business would likely focus on is repairing or replacing a damaged or worthless equipment. In this way, the cash flow that a business gets is spent on an asset that can further generate income rather than on expenses to maintain its existence.