Woodworking Business vs Hobby/ Liability Insurance

[Andrew Joiner]

I was surprised to learn recently that giving away a product you make is not much different than selling it! You still can be sued if your product causes or is believed to have caused harm!
I've seen posts on making and giving wooden toys away here. If you give away anything you make you might want some protection.
Here's the full story.
I had commercial/business insurance when I started as a pro woodworker. In my first years I had minimal coverage and I got sued. They sued for 100k more than I was covered for. I sweated out the 14 months that it took for the case to be over thinking I may have to pay 100k for this oddball case that was not my fault! The case was settled, my insurance paid it all and I could finally sleep well again. Needless to say I paid for higher liability limits from then on until I got out of the business.

For years now I've been a hobbiest. I make things for fun now. Just for me and my family. When friends offer to pay me to build things I decline. I don't need the money nor do I want the hassles and costs of business insurance, product liability and tax accounting.
However I wanted a challenge, so I found a creative way to have the satisfaction of designing, building and marketing a product without the hassles and liability.
---- Or so I thought.
I made my wife a gift last year. She loved it. Her friends loved it. A friend who's a stylist said "you could sell these for a lot of money". I said no, then thought about it. The stylist friend is young, inexperienced and we wanted to help her with her business. So I agreed to give her the totes for free to sell. I'd get all the fun of designing and making with no deadlines, hassles or liability. I made some samples and everyone was excited. I was very flattered.

I talked with my lawyer recently and told him how creative my idea was to help someone, have fun and avoid liability. He said "No your wrong".
My lawyer said the deal with the stylist would make me a manufacturer from a liability standpoint and commercial/business product liability was recommended. I called off the arrangement with the stylist just before anything got sold, and everyone is sad. Mostly me. Lesson learned.
I asked my lawyer if any products given away by a hobbiest would be covered by homeowners/personal liability and he wasn't sure.

[Andrew Joiner]

Moderators please add the "e" to insurance in the title. thanks

[John C Cox]

The answer is that you can always be held liable if the jury and judge decide so... In the USA with the civil tort system as it stands - the principles of unlimited liability and Joint and Several Liability applies.... Which means a plaintiff can sue whoever they want to sue and the judgement will go against everybody who is not strictly declared fully innocent... And the plaintiffs can then collect any or all from whichever defendant they can get it from...

For example - if you give away food and someone gets sick because it was contaminated - you could he held liable.... Soup kitchens routinely have to carry liability insurance and meet applicable food safety and licensing requirements - even though they sell nothing...

Church hospitals were completely driven out of existence for the same reason... You can sue somebody who gives you free care... Liability for injury does not depend on the value of the item...

[Bob Bouis]

Good advice, especially the bit about the fact that you can't escape liability for giving something away (generally).

But one caveat is that having insurance usually makes you more likely to be sued in the first place, since it's much easier to collect money from insurance companies than it is from ordinary folks.

[Andrew Joiner]

Good advice, especially the bit about the fact that you can't escape liability for giving something away (generally).

But one caveat is that having insurance usually makes you more likely to be sued in the first place, since it's much easier to collect money from insurance companies than it is from ordinary folks.

Thanks Bob.
Your right having insurance may make you a bigger target for a lawsuit. Having assets and no insurance would be the worst case if your sued.

[Jim Becker]

Liability is always a concern, especially in this day and age, so even if one isn't producing as a formal business "for money", beyond the occasional trinket, it's probably worth talking with one's insurance agent about what is or isn't covered on the existing homeowner's insurance and umbrella relative to these "business" activities. Some homeowner's carriers do include some level of protection for home based hobby businesses; some specifically exclude that. Once my business filings are complete, I'll be having that conversation with my agent for sure.

[Art Tripp]

Another consideration is for products you produce while you have insurance, and are still in the hands of others after you decide to end your insurance (perhaps choosing to no longer do woodworking). Are you perpetually liable for something you produce, and can you ever cease carrying insurance?

[Carlos Alvarez]

You can be sued for any action any time. Live your life how you choose, but I'm not going to stop doing what I love due to fear. But then, we also have all family and business assets in trusts, and a lawsuit would probably just be resolved through bankruptcy.

[Simon MacGowen]

I do not see how I can be sued successfully as an amateur woodworker when I give out something, say, a chair, as a gift. If someone sat on it and it broke apart resulting in an injury, I would see him or her in the court, as I had to be proved I was negligent when I made the chair. That is not something one can prove.

Never have I lost any sleep from my decades of hobby woodworking over any lawsuits that may come their ways to my shop. I have the usual basic homeowner's liability insurance (2 million for people who fall outside my house, etc.) and I am not going to look into coverage for someone suing me because I give him a gift. Let him or her sue me and I will counter-sue to make sure any lesson learned is both ways. My lawyer will be instructed to seek court costs.

If you run a business, set it up with limited liability.

Simon

[Andrew Joiner]

Another consideration is for products you produce while you have insurance, and are still in the hands of others after you decide to end your insurance (perhaps choosing to no longer do woodworking). Are you perpetually liable for something you produce, and can you ever cease carrying insurance?

When I had business insurance with product liability I asked my agent about this. He said something like " the product liability covers the products made during the time the policy is in effect"" after you quit the business and paying for the product liability it covers the products made during the time the policy was in effect forever" I assume forever meant as long as the insurance company is in business.
I've kept the paper records on that in my"forever file" just in case.

[Darcy Warner]

Another reason I despise people in general.
No offense to you people. Lol

[Bill Carey]

Another reason I despise people in general.
No offense to you people. Lol

astute observation!!! LMFAO

[Roy Turbett]

I used to have a church group meet in my shop for woodworking and fellowship. I checked with my insurance agent before I got started to be sure I was covered for liability and was told that I was so long as I wasn't running a commercial enterprise. I didn't charge anything for use of the equipment and required all participants to sign release from liability forms stating that they wouldn't sue if they were injured and that they wouldn't sell anything that they made. My agent was OK with this but a lawyer at church suggested that I get the approval in writing. So I wrote a letter explaining what I was doing and my insurance company responded by saying that I could continue for the duration of my current policy but that they would not renew it should I decide to continue the practice. The problem stems from a person being able to waive their personal right to sue should they be injured, but they can't waive their insurance company's right to sue to recover medical expenses. Fortunately, another guy at church owned an insurance agency and found a company that would insure me. The group met for six years with up to 14 people at a time in the shop without an accident. Eventually, the thought of an accident became too much and I gave it up about 3 years ago. We just started up again but shop time is limited to learning how to use hand tools and woodcarving.

[Simon MacGowen]

Eventually, the thought of an accident became too much and I gave it up about 3 years ago. We just started up again but shop time is limited to learning how to use hand tools and woodcarving.

It is not clear if you still have insurance coverage as your hand tool and carving sessions are going on. Because injury is injury whether it is caused by power or hand tools and the chances of being sued, though smaller, still exist, don't they?

Simon

[Roy Turbett]

It is not clear if you still have insurance coverage as your hand tool and carving sessions are going on. Because injury is injury whether it is caused by power or hand tools and the chances of being sued, though smaller, still exist, don't they?

Simon

I didn't stop because of a lack of insurance coverage. I stopped because of my nerves. There were 56 different people who visited during the six years we used power tools and frankly some of them were not very good students. Ironically, several of my worse students are surgeons! I had four wood lathes, an industrial SawStop, two bandsaws, two radial arm saws, two scroll saws, two sanders, a planer, a jointer, central dust collector and a drill press with up to 14 people at a time in the shop. The whole experience made me appreciate what shop teachers go through. Now its just 2-6 guys sitting around talking and doing some wood carving and the like.