Custom Motorcycles

In today’s episode Chuck explains some of the ways a builder of custom motorcycles can protect themselves from liability.

Custom Motorcycles Video Transcript

So Mr. Franklin, I have a question about products liability. I have been building custom bikes from the ground up for some time. I want to know what I need to do to protect myself.

You’re talking about protecting yourself from possibly being sued?

Yes.

Okay. First of all products liability is this: You’re the manufacturer, or possibly something in the distribution chain of that product like a vendor. You as the manufacturer are putting together all of these pieces to make a full sized motorcycle . The first thing you need to do is incorporate to protect your personal assets. Second you will want to go out and buy the best insurance you possibly can.

That insurance will cover the actual product which you are developing in case somebody goes down the road, they lose a part, let’s say in this case the frame breaks and they crash and hurt themselves, or worse they die. If you don’t have that kind of protection relative to liability, then you’re going to have a problem. Someone is going to sue your company, they could bankrupt you. They will try to reach you personally if you have assets and they can possibly pierce the corporate veil, and get around the corporation to get you personally. But insurance is the first step. Since you are creating a motor vehicle, that liability insurance may be fairly expensive.

Once you have incorporated and insured your product, you will want to require that all of your vendors (the ones that are producing the parts to put on your motorcycle) have at least 2 to 5 million dollars in liability insurance for their parts, in case they fail. Because, god forbid the person who buys your motorcycle ends up paralyzed, the damages can be incredible. You have no idea how high they can be. So you having let’s say a 5 million dollar liability policy may not be enough.

So if you’re dealing with company XYZ and they are making foot pegs for your bike, you will want to make sure that they are fully insured in case they have an issue with the foot pegs. Let’s say they break off and the person falls or something, then they could go after them as well. Also, I would construct an agreement from all of your vendors that they would indemnify you in case you get sued. That they would step in if it is their faulty product that caused the defective custom motorcycles or products that you ultimately built.

Does that make sense?

Yes. Thank you.