Product liability insurance protects the policyholder against claims made against them in respect of their legal liability for personal injury or property damage arising from the sale or supply of a product.
The policy provides protection in respect of compensation awards made against the policyholder and crucially pays the legal defence costs of any claim made against the insured whether speculative or genuine.
The insurance should be considered as essential by any persons or businesses involved in the supply of products or goods.
Who needs Product Liability Insurance?
- The producer of the product or the manufacturer.
- Any person putting their name, brand or mark or purporting to be the producer of the product.
- Any person who has imported the product into member state from outside the EU.
- Any person who repairs or reconditions the product.
- The supplier of the product.
I don’t manufacture, why do I need product liability insurance?
A chain is formed throughout the process from raw material to eventual sale of the finished product and the courts will track the product back to the source of the problem, but if there is a break in the chain, or the court feels that the prospect of a satisfactory remedy is remote, perhaps an overseas supplier from developing nations – the action will lie with perhaps the importer of the goods or even the local shop!
Does the product have to be defective or faulty for a product liability claim?
No. This is a very common misconception of the nature of the cover. The use of the words “defective” and “faulty” is widespread in many authoritative definitions and articles including ones from organisations and businesses that really should know better!
Unfair Contract Terms Act and Sale of Goods Legislation
The Unfair Contract Terms Act and Sale of Goods Legislation are important pieces of legislation governing the provision of goods and services. Similarly, contract law makes assumptions that goods will be safe, free from defect and fit for their intended purpose.
Negligence will not always have to be proved, simply that the product was defective and that injury or damage was suffered as a result of that defect! There are defences to this, but the reality is that the cost of defending such actions fully justifies the payment of product liability insurance premiums.
How much product liability cover do I need?
Policyholders should make an assessment of the limits they require based upon the type of products they supply and their potential exposure to loss.
The limit of indemnity under a product liability insurance policy is the insurers maximum liability in respect of claims during the policy year. This “aggregate” basis differs from public liability where the limit of indemnity is the insurer’s maximum contribution in respect of any one claim or occurrence. This aggregate basis should be considered when you are choosing your limit of indemnity.
Common limits are £1M, £2M and £5M, although higher limits are available upon request.
How do I buy product liability insurance?
Product liability insurance is not generally available as a stand-alone insurance product, it is bought alongside a public liability insurance policy and often forms part of the same contract. The cover is also available in many package insurance policies such as shop, office and commercial combined but even then it sits alongside the public liability cover.
As specialists in the arrangement of liability insurance in the UK, we provide a fast and cost effective service offering product liability insurance to a wide range of businesses and organisations. You can apply on-line or you can call our team of brokers to discuss your business insurance requirements.