Product liability insurance is a type of cover that protects you against damages paid if your product is responsible for injury to people or damage to property. Some insurers do not offer this as a standalone product, but it will often be available as part of a business insurance package. This insurance may be useful if you produce, repair or supply any sort of ‘product’ as you may be considered liable if the product is regarded as ‘not fit for purpose’. It doesn’t matter what size your business is, as the cover level can be adjusted accordingly.
- Details of cover
Product liability insurance policies insure you against damages paid out because a product you have supplied, manufactured or serviced causes property damage or personal injury. In the case of personal injury, you will also be covered if the NHS attempts to recover the cost of hospital treatment and ambulance costs.
- Who is responsible?
The manufacturer of the product is normally liable, but claims are often brought against the supplier first. Even if you did not manufacture the product, you may still be liable for damages if the manufacturer has gone out of business or you cannot identify the manufacturer. If you modify, repair or refurbish the product then you may also be liable, as well as if you imported it from outside the EU or if the name of your business is on the product.
- Qualifying claims
In order to claim on the policy, you must be able to show that the products were faulty when they were supplied to you, and that consumers were given proper safety instructions that included warnings about misuse of the product. Any sales contract that you give to your customer must have included terms for the return of faulty goods, and your supply contract must include details of product safety, quality control and product returns.
- Cover levels
Most businesses have cover of around £2 million. The usual range is between £1 million and £5 million, and the actual level will be determined by the type of product and its intended use.
You should consider speaking to a specialist if you are considering product liability insurance. They will be able to help you choose a policy that suits your needs and also check that your business has the correct contracts and terms in place for cover to be effective.
By James Clapton