Products must be ‘fit for purpose’, safe and free from fault. If not you may be liable for damage or injury if you manufacture, sell or even give away a product.
Product liability insurance can cover your legally responsible for any damage or injury that a product you supply causes.
You’ll be liable for compensation claims if your business name is on the product, you imported it from outside the European Union or from a manufacturer who has gone out of business. You are also liable if you repair, refurbish or change a physical product or can’t say who manufactured it. The original manufacturer is liable as is the processor where the product involves parts from multiple manufacturers.
What does Product Liability Insurance cover?
Product liability insurance covers you against damages awarded as a result of damage to property or personal injury caused by your product. Personal injury claims and the cost of defending them can be significant.
Product liability insurance covers you against unforeseen circumstances, systems failures, faulty materials etc.
Normal product liability insurance will not cover you against customers financial and consequential losses caused by a faulty product which you manufactured, serviced or supplied. Bad workmanship or inferior products may cause a claim to be restricted or refused.
Defence against Claims
- Demonstrate that the products were faulty when they were supplied to you.
- Give consumers adequate safety instructions and warnings about misuse
- Included terms for return of faulty goods to the manufacturer or processor in any sales contract you issue to consumers
- Your manufacturing should be conducted according to industry best practice and have good quality control and record-keeping systems. Train your staff.
- Have product safety, quality control and product returns matters covered in supply contracts with the manufacturers.
Other Issues For Produce Liability Insurance
- Assess the size of the risk and get an appropriate level of cover. £1m-£5m may normally be the right ball park. If your product is special think about Asbestos claims, Buncefield oil depot or public transport accidents where claims were dramatic.
- Consider the markets you sell too, USA may be more litigious than UK government agencies.
- Manage premiums by talking to your insurers and having a risk management strategy. It will keep premiums down and avoid damage to your reputation.
- Get an Umbrella policy that covers massive claims on a contingency basis.
- Talk to your brokers and insurance experts to make and action a plan.