FDA Compliance Won’t Protect You From Lawsuits: Why Cosmetic Brands Still Need Product Liability Protection

Here’s a scenario we see all too often. You’ve spent months, maybe years, perfecting your cosmetic product. You’ve registered your facility under MoCRA. Your labels list every ingredient in descending order of predominance. Your formulations use only approved color additives. You’ve done everything the FDA requires. 

Then a customer files a lawsuit claiming your face cream caused a rash. Your legal bills hit $15,000 before you even get to court. Amazon suspends your seller account. Your retail partners demand proof of insurance before they’ll restock your products. 

Here’s what most cosmetic companies don’t realize until it’s too late: FDA compliance and product liability protection are two completely different things. One keeps the FDA off your back. The other keeps you out of bankruptcy court. You need both.

FDA Compliance Doesn’t Prevent Lawsuits

This is the biggest misconception in the cosmetics industry. Companies assume that if they’re FDA compliant, they’re protected from product liability claims. They’re not. FDA compliance is a regulatory requirement. 

It means you’ve met the minimum standards set by the federal government for product safety, labeling, and manufacturing. It prevents the FDA from taking enforcement action against you, including warning letters, product seizures, and facility shutdowns.

Product liability is a legal risk. It means a customer can sue you if they claim your product caused harm, regardless of whether you followed every FDA regulation to the letter. FDA compliance is not a defense against product liability lawsuits.

• FDA compliance protects you from: Warning letters, product seizures, facility inspections that result in enforcement action, and civil penalties under MoCRA.

• Product liability insurance protects you from: Customer lawsuits, legal defense costs, settlement payments, medical claims, and platform suspensions.

• The gap: You can be 100% FDA compliant and still face a million-dollar lawsuit.

Real-world example: A cosmetics company followed all FDA labeling requirements, listed every ingredient, and used only approved color additives. A customer with a rare allergy to a common ingredient had a severe reaction. 

The company was FDA compliant, but it still faced a lawsuit for failing to warn consumers about the potential for allergic reactions. The lawsuit cost them over $500,000 in legal fees and settlement costs.

Courts Don’t Care That You Followed FDA Rules

When you’re in court facing a product liability lawsuit, the judge and jury aren’t interested in whether you checked all the FDA’s boxes. They’re interested in one thing: did your product harm the customer? 

The legal standard in a product liability case is not whether you followed the rules, but whether your product was “defective” in a way that made it unreasonably dangerous.

A product can be considered defective in three ways:

• Design defect: The product was designed in a way that makes it inherently unsafe.

• Manufacturing defect: The product was manufactured incorrectly, making it unsafe.

• Marketing defect (failure to warn): You failed to provide adequate warnings or instructions about the product’s risks.

Even if you’re 100% FDA compliant, a court can still find that your product had a design, manufacturing, or marketing defect. This is why you can’t use your FDA compliance as a shield in a product liability case.

Three Questions Every Product Liability Case Asks

When a customer sues you, the case will boil down to three questions:

1. Did your product cause the injury? The customer has to prove that your product was the direct cause of their harm.

2. Was the product defective? The customer has to show that your product had a design, manufacturing, or marketing defect.

3. What are the damages? The customer has to quantify their harm in terms of medical bills, lost wages, and pain and suffering.

Your entire legal defense will revolve around these three questions. And your ability to answer them effectively will depend on the quality of your record-keeping, the clarity of your warnings, and the strength of your product liability insurance.

Product Liability Insurance Is Non-Negotiable

If you’re selling a physical product, you need product liability insurance. It’s that simple. It’s not a “nice to have.” It’s a “must have.” Without it, you’re one lawsuit away from financial ruin. 

Your legal defense costs alone can run into the tens or hundreds of thousands of dollars, even if you win. And if you lose, you could be on the hook for millions.

Product liability insurance covers:

• Legal defense costs: Attorney fees, court costs, expert witness fees.

• Settlement payments: The cost of settling a lawsuit out of court.

• Judgments: The amount a court orders you to pay if you lose.

Most major retailers and online platforms (including Amazon) require you to have product liability insurance. They’re not going to take on the risk of selling your products if you’re not insured. So if you want to scale your business, you need insurance.

Proactive Risk Management Beats Reactive Damage Control

The best way to protect yourself from product liability lawsuits is to be proactive. Don’t wait for a lawsuit to happen. Take steps now to minimize your risk.

• Review your labels: Are your warnings clear and conspicuous? Have you identified all potential risks?

• Review your marketing: Are you making any claims that could be considered misleading? Can you back up every claim with evidence?

• Review your manufacturing process: Do you have quality control measures in place to prevent manufacturing defects?

• Review your insurance coverage: Is your product liability insurance adequate for your sales volume and risk profile?

An experienced product liability attorney can help you conduct a comprehensive risk assessment and identify potential weaknesses in your compliance and risk management programs.

The Bottom Line: Compliance + Insurance = Protection

FDA compliance and product liability protection are two sides of the same coin. You need both to protect your business. FDA compliance keeps you in business. Product liability insurance keeps you from going out of business.

Don’t wait until you’re facing a lawsuit to take this seriously. By then, it’s too late. Be proactive. Review your labels, your marketing, and your insurance. And if you have any questions, talk to an attorney who specializes in product liability for the cosmetics industry.

The Bustos Law Group has helped hundreds of cosmetic and product companies navigate the complex world of FDA compliance and product liability. We can help you identify your risks, strengthen your compliance program, and ensure you have the right insurance coverage in place. Contact us today for a consultation.