Product liability insurance

Product liability insurance protects a business should a customer allege bodily injury or property damage, resulting from the supply of faulty or defective products. A business will have legal responsibilities for the quality of product or goods supplied and consequently may face claims if the product causes injury or damage.

Product liability insurance covers against a compensation case brought against a producer for loss, damage or injury, which can be made any time within three years of using the product. In some cases this can be longer. There is no upper limit to how much the claim can be and is calculated against the severity of the individual case and the scale of loss.

If a faulty product is widely distributed and has wide scale affects the compensation costs can easily be in millions. Even compensation to an individual customer who suffers loss of earning for six months can cost thousands of pounds. This makes product liability insurance a vital part of the protection for your business as well as part of the safety commitments you make to your customers.

It is your responsibility as a business to decide upon the level of cover required. Some products may be more prone to risk than others, so take care to ensure that any policy you purchase is adequate for your needs. Common considerations include:

• Compensation claims – Is the policy sufficient to cover a compensation claim if your product causes injury or property damage?

• Contractual obligations – Do any contracts you have with you clientele specify a minimum level of cover?

Though product liability largely relates to producers, your business could be held liable for a faulty product even if you are only the distributor. Whether you are a manufacturer, supplier, distributor or retailer; if your business makes products available to the public, you may be liable for any injury or damage they cause. It’s therefore important to have the right insurance in place.

You don’t need to manufacture a product in order to require product liability. Importing and repairing in some cases is enough to make you liable. Below we look at some of the situations were a business might need product liability insurance.

• If you manufacture a product

• If you commission the manufacture of a product and/or your business name appears on the product

• You use material or components from a supplier/producer who is no longer in business or is un-identified

• You use materials/components or important goods from outside the European Union

• If you have a ‘hold harmless agreement in place with any supplier which indemnifies their liability

With products liability you will be covered by the policy in force at the time (date) the incident giving rise to a potential claim occurred. So, with insurance in place when you sold / supplied / produced the product, if a client makes a claim against you 2 years later, it must be claimed off the insurance policy that was in force at the time the accident occurred.

Below are some instances where product liability may still be the business's responsibility even though they are not the manufacturer:

• If the product includes your company's name i.e. white label products

• If the product has been imported from outside the European Union

• If the true manufacturer of the product has gone out of business or can no longer be identified

• If your business repairs, services or fixes an existing product.

• If your business is involved in any aspect of the production of the goods - from supply of components, manufacture, assembly, printing, painting or packing

If you’re unsure if product liability insurance is something your business needs, just ask the team. We can identify whether your business requires the cover then find the most suitable insurance solution for you.

• Any company that sells a product with their business or brand name on it

• Any business that repairs or repurposes a product

• Any firm that manufactures a product

• Any business that imports products outside of the European Union for sale in the UK

In addition to this, if the actual manufacturer has gone out of business or cannot clearly be identified then the seller of the product could be held liable.

Whilst the manufacturer will hold ultimate liability if these aspects don't apply to your business you, as the retailer will have to provide certain evidence, such as that the products were faulty when supplied to you.

Not every business requires product liability insurance, it depends on what your company provides. For example, a training and consultancy business will provide a B2B service rather than a product and consequently will not require product liability insurance. However, a business that manufactures tools for firms in the construction industry, for instance, will undoubtedly require manufacturing liability insurance.

Our policies are tailored to you so we would be able to advise on the cover you need based on your business activities. Inform us of the type of products you work with and we’ll aim to source cover that fits.

A business can be both or one or the other. This depends on the business model and who their customers are. We will talk more about the responsibilities of each in the next section but first let’s understand exactly which category or categories might apply to you.

The largest portion of responsibility towards product liability falls on the producer of the product. This can include:

• Manufacturers and retailers that supply own-brand products

• Any business that repairers, alters or services an existing product

• Someone who repurposes or rebrands an existing product

• Importers of products from places where the safety requirements differ from the country it is sold in

Retailers and distributers such and shops and sellers are not usually directly responsible in a product liability case but do still have a duty of care to their customers.

To help you spread the cost of your premiums, we offer a quick and easy direct debit scheme for spreading payment over ten months. Please visit our dedicated Direct Debit page to find out more.

If you would like to know more about our monthly payment option, please visit our dedicated Direct Debit page.