The Johnson & Johnson wake-up call for businesses

Back in 2009, headlines around the world were dominated by a huge corporate scandal involving Johnson & Johnson¹. Many of us know the company for everyday medicines and well-loved baby products, including their famous talcum powder. It was this product that became the centre of a long-running legal battle.

When a product causes harm

Talcum powder is a natural mineral that’s often found near asbestos in the earth. Asbestos is carcinogenic – meaning it can cause cancer – when people are exposed to it over time, so talc products have to meet strict safety rules before they can be sold. Johnson & Johnson maintains that their products met these standards.

Despite this, thousands of people have taken legal action against them, arguing that the company knew their talc was contaminated with asbestos and that long-term use led to ovarian cancer and mesothelioma.^{2 3}

Johnson & Johnson maintains their product was safe but stopped selling talc-based baby powder in 2023⁴.Despite this, they’ve already paid out billions in settlement^{5 6}. Three attempts to declare bankruptcy have failed⁷, and more claims are still coming forward. It’s a clear reminder that even the biggest companies can face serious consequences when things go wrong.

Managing risk before it manages you

When you run a business, the products you sell are your responsibility – including how they affect the people who buy them. So, if you sell a product that goes on to cause harm or damage, your business can be held accountable. That’s what we mean by product liability.

There are three different types of product liability:

Manufacturing defects – where something goes wrong during production
Design flaws – where the product’s unsafe even when made correctly
Failure to warn – where customers aren’t given the right safety information or instructions

Any business that makes, sells or supplies products takes on a level of risk. If a product causes harm, even by accident, your business may need to deal with legal costs, compensation claims and lots of paperwork. What surprises people is that this can happen even if the business did nothing wrong or the claim isn’t successful.

In the UK, product liability can arise in a couple of different ways, either in negligence in tort – where the person bringing the claim has to show that a business failed to take reasonable care – or under the Consumer Protection Act 1987. Claims that fall under the latter are about whether the product was defective and caused harm rather than whether the business acted carelessly.

Product liability insurance aims to help manage that risk, so the day-to-day running of the business is minimally disrupted by an unexpected claim. It can also help protect your reputation during stressful situations, giving you a boost to handle things calmly and confidently.

Chris Wright, Everywhen’s Account Director, says: “How often are contractual liabilities backed off within the supply chain?”

Chris’s point highlights that many businesses don’t actually have the legal protection they think they have within their supply chain.

The Johnson & Johnson fallout

Only a decade ago, Johnson & Johnson was one of the most trusted names on the high street, offering baby products and everyday medicines found in most people’s homes. But the talc scandal shifted that sense of familiarity almost overnight. Even though the company maintains that their products were safe, the volume of claims, the severity of the allegations, and the length of the legal battles have created lasting doubt in the minds of many customers. Once people started to question whether these products were as safe as they once believed, it was very difficult to restore their confidence.

Removing talc-based baby powder from sale and replacing it with cornstarch versions has helped the company move forward, but it hasn’t repaired the damage to their reputation. Especially when concerns have been in the spotlight have been so long, rebuilding customer trust is going to take more than a product change. For any business, it shows just how quickly a reputation can change and how important it is to stay transparent with customers if issues arise. It takes time to earn trust and, as Johnson & Johnson have learned, it takes even longer to win back.

When insurers push back

Although Johnson & Johnson had product liability insurance, it hasn’t resolved their challenges. Some insurers have argued that asbestos-related claims aren’t covered under the company’s policies. A few insurers have contributed partially, while others say the company needs to cover the full cost itself⁸.

For any business, this highlights an important point. Taking out product liability insurance is a smart move, but it is just as important to understand exactly what’s included and what’s not. The right cover can be incredibly supportive, but only if you’re fully aware of what it protects you against.

It’s also worth remembering that product liability insurance doesn’t always cover the cost of recalling or withdrawing a product from the market if it is defective – but many businesses assume they do. In actual fact, these costs are usually dealt with under a separate and more specialised type of insurance.

If you sell or supply a product, this could be for you

Product liability cover is something that many businesses need in their corner. While for manufacturers and retailers the benefits of this cover are clear, they aren’t the only ones who need to think about it. Distributors, wholesalers and even smaller firms that only handle part of the supply chain can still be held responsible if something goes wrong because of a product they’ve sold or supplied. If your business has any involvement in getting a product into a customer’s hands, this type of insurance is worth considering.

Particularly if your business imports or works with overseas manufacturers, it’s important to think about your rights of recourse – your right to claim back money from a supplier who caused the problem – if something was to go wrong. Even if your contract includes a warranty or indemnity, these can be difficult to enforce in other countries, as they have their own local laws and processes. If that ends up being the case and you can’t get your money back, you could be left footing the bill.

Chris Wright reinforced the point: “Where UK distributors supply products to consumers within the UK or overseas, to what extent do they have full rights of recourse and traceability against the manufacturer?”

He continues, “This is fundamental if the distributor wants to articulate their products liability exposure as a contingent one to the insurance market to achieve the most competitively priced premium with broad scope cover.”

And on overseas sourcing, Chris adds, “Buyers beware when distributors source product from territories such as India and China where often traceability and full rights of recourse are challenging at best and nonexistent at worst, which could void their products liability insurance if these features are a condition precedent to liability within their policy.”

Even smaller and medium-sized businesses that don’t see themselves as ‘high risk’ can be affected by a faulty product or a claim they didn’t expect. Having the right cover in place means you’re not left to manage complex issues alone and can keep your business running smoothly while you focus on looking after your customers.

The right time to take action is now

At its core, product liability insurance is about managing risk, not assuming the worst. Having the right protection in place simply ensures you have the confidence that, if something does go wrong, you have support behind you.

The best approach is a proactive one. Clear safety information, careful product checks and transparent communication help protect both your customers and your business. Insurance adds that extra layer of reassurance. It allows you to keep moving forward, knowing you’re prepared for the unexpected.

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Consistent with our policy when giving comment and advice on a non-specific basis, we cannot assume legal responsibility for the accuracy of any particular statement. In the case of specific problems, we recommend that professional advice be sought.