Liability insurance

My last post prompted this comment: “I suspect that by avoiding installations, you were also able to avoid liability insurance as well.”

I want to make it very clear that I do not and would never suggest that anyone attempt to market any product to the public without substantial liability coverage. Even if it is not required by local, county, state or federal laws (and somewhere in there you can pretty safely bet it is!), there is simply too much risk in selling products without this safety net. I should mention here that I am no fan of insurance companies. But be that as it may, the risk of a lawsuit carrying penalties of staggering proportions is simply too great to operate without liability coverage.

My favorite insurance story involves a guy who used to have a large shop right across from mine. He made bunk beds. Not elegant bunk beds but the pine 2×4, bolted together, rustic looking beds that you see in second-hand stores and figure that some guy cobbled them together in his garage. He cranked out thousands of them and shipped them all over the country.

He totally operated under the radar. He used to keep one eye open for the fire inspectors who appeared at regular intervals and when he saw the big red truck pulling in the driveway, he would shut his shop down, lock the doors and slip out the back. OSHA inspectors would also find a dark shop and locked doors as would anyone else who had anything to do with business regulation. The guy had some kind of physic ability to know when these guys were near. And, needless to say, he had no liability insurance.

One day he got a letter from some federal consumer protection agency informing him that new regulations had been put into effect and that his guard rails did not comply. The new regulations were retroactive which meant that all of the beds he had sold over the last several years were affected. The letter demanded that he recall thousands of beds, replace and/or retrofit the guard rails and provide explicit documentation. He was also informed of several lawsuits against him.

There was no way this guy was going to be able to handle the massive effort, expense and resulting mountain of legal paperwork this was going to require. Finding himself without the financial protection that liability insurance would have at least theoretically provided, he decided, on the spot, to fold up his shop and disappear. Within two days, his space was empty and he and his family were gone. No one knows where they went and no one ever heard from them again.

Most of us do not have the luxury of being able to simply vanish in a puff of smoke in the face of a difficult situation. So it becomes imperative that we at least make an effort to protect ourselves from these possible eventualities. Like it or not, liability insurance is a necessity.



  • Chuck says:

    Is that true that the Feds can make a regulation retroactive back several years? Maybe he should have formed a small corporation or LLC and just pulled the plug.

  • BillyJ says:

    By no means am I a fan of government or the regulations it imposes. Trying to protect yourself from lawsuits (frivolous or warranted), attempting to keep abreast of EPA, OSHA, and every other regulatory agency mandates, and at the same time trying to make a living, can take every bit of energy one can muster up. The more you expose yourself to the public, the greater the chance you’ll be sued by a customer, brought before the IRS, or closed down by the EPA or OSHA for some arbitrary rule imposed by some clueless politician or agency puppet.

    The best possible chance anyone has to survive is to put as many obstacles between you and them. Forming an LLC (one for every aspect of your money-making life) and purchasing as much liability insurance as you can afford, can serve to stall the big, bad, wolf from blowing down your business.

    Does anyone really have the time, resources, and ability to fend off Leviathan? Perhaps your neighbor has the best idea. What he did sounds criminal, but it was the governmental regulations that made him a criminal. Things we did 20-years ago are now considered illegal by some regulatory agency, making some of us criminals, too. But David, like you, I cannot up and vanish (although sometimes I think it would be wonderful).

  • Pat Gilbert says:


    You are conflating regulations and liability insurance they are separate issues. The fact that they are able to make the law retroactive is absurd and the vastly bigger issue. How many jobs did this regulation cost? Apparently the product was useful to someone or he would not have had any customers. But no doubt the regulator will have a very well paying job while this business is toast. Much like the farm bureau, 2 regulators for every farm. The problem is the incessant regulators pushing business into compliance with bureau of compliance is usurping the constitution and enslaving the people of this country. Once again I adamantly disagree with your conclusions and hope that you know more about wood work than economics and politics.

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