- What is product liability insurance?
- Who needs product liability insurance?
- Do you owe a duty of care?
- Define a safe product and our responsibilities?
- What are UK product liability laws?
- What product risk management should we undertake?
- Why purchase product liability insurance?
- How do insurers underwrite product liability?
- What is the potential personal injury claim cost?
- How much product liability cover should you purchase?
- What is product recall insurance?
- How to compare product liability insurance cost?
What is product liability insurance?
Product liability insurance will protect against claims arising from injury or property damage as a result of a fault with a product you have provided.
The business insurance will pay legal costs incurred in defending allegations and compensatory damages arising from any judgment, award or settlement.
Who needs product liability insurance?
Anyone who supplies products are responsible for their safety. The level of responsibility will depend on whether you are involved in the manufacture of the products, or whether you are involved with the distribution.
As a manufacturer you hold the ultimate liability for the safety of the product. However, the below identifies circumstances where you can still be wholly responsible from injury or property damage as a result of a fault with a product:
> If you repair or repurpose a product.
> Materials are imported from outside the European Union (UK post-Brexit)
> If you commission the manufacture of a product.
> If your business name or trademark appears on the product.
> Materials are from a supplier who is no longer in business or is unidentifiable.
> The supplier has a hold harmless agreement that indemnifies their liability.
Do you owe a duty of care?
Products sold to consumers and commercial customers under The General Product Safety Regulations 2005
are required to be 'safe'.
The steady rise in counterfeit and illegal products makes distributing products increasingly complex. The UK government offers guidance on Product Liability and Safety Law and Product Safety for Manufacturers.
Many consumer protection laws rely on 'strict liability', where it does not matter if the person accused did not intend to break the law. To use this defence they must satisfactorily prove all reasonable precautions were taken to avoid an offence being committed.
Failing to meet your responsibilities can have serious consequences. Potential product liability claims arising from anyone injured or who has suffered damage to personal property.
Define a safe product and our responsibilities?
A safe product offers either 1) no risk; or 2) a minimum acceptable level of risk, taking into account reasonably foreseeable use of the product and the need to maintain a high level of protection.
As a producer
(i.e. importer, manufacturer, own-branded, re-conditioner) you are responsible for ensuring your products are safe and carry adequate instructions and warnings. In addition you will need to undertake a 'conformity assessment'
, which shows the product to be safe (i.e manufacturing standards or third-party assessment). You are required to have measures in place to identify any risks arising from a product's use and to ensure the necessary corrective action can be taken (i.e. product recall).
As a distributor you must not supply goods you believe could be dangerous. Legislation requires you to monitor the safety of the products you supply and advise the producer if any problems arise.
As a specialist product liability insurance broker, we have the capacity to tailor your insurance to meet your specific requirements.
What are UK product liability laws?
Product safety in the UK is governed by a regulatory framework consisting of both national and European-derived legislation.
there will need to be changes to the UK’s product liability laws. A draft statutory instrument
amending UK product liability and safety laws has been put before Parliament for approval.
The Health and Safety Executive offers the following guides:
Although the safety regulations set out safety in general terms, practical guidance to compliance can be found as British Standards (BS ENs).
Particular attention should be taken with high risk products such as: toys
, electrical goods
, as specific regulations apply. Business Companion
offers useful advice with respect to specific product regulation.
Note you are not allowed to supply a product which you know, or ought to know is unsafe. You can find recent product recall notices via the CTSI website.
What product risk management should we undertake?
You must ensure a level of care has been taken to keep the consumer safe. The below offers a number of measures that can help mitigate your product liability risk:
> Provide information to help consumers understand the risks.
> Provide sufficient warnings of potential risks and dangers of improper use.
> Effectively monitor and report on the safety of all products.
> Take early remedial action should safety concerns be identified.
> Retailers should take reasonable steps to ensure the safety of the products sold and identify the sources.
A formal quality management system will provide value in supporting a defence against claims arising from injury or property damage as a result of a fault with a product you have provided.
Why purchase product liability insurance?
We operate a compensation culture in the UK with members of the public generally more aware of their rights. In addition, the no win, no fee system makes legal advice more accessible with no upfront costs for the claimant.
It is not a legal requirement to purchase product liability insurance
, unlike employers liability insurance
. However, if you design, manufacture or supply products to your customers, it offers cost-effective protection against potential liabilities should an accident occur.
How do insurers underwrite product liability?
Insurers will be interested in the type of product being produced, where materials are sourced and where you are sending finished goods.
- Products sent to the USA or Canada can increase your exposure due to the size of the compensation awarded provided by the courts.
- Materials or products produced in Asia and other countries can restrict your ability to hold the supplier to account and increase your exposure.
- Safety critical goods such as toys, electrical goods, machinery, fireworks, food and medicines carry an increased risk should they fail when being used.
- Perishable goods such as food or medication can easily be destroyed in transit or be ineffective once sold if not stored correctly.
Product iability insurance definitions do vary, therfore it's worth considering the terms and features to fully consider what cover best meets your needs.
What is the potential personal injury claim cost?
Personal injury compensation can include financial recompense for any expenses incurred, loss of earnings, possible loss of future earnings, pain and suffering, and perhaps other items.
In addition, even if the business was not the cause of alleged injury or illness, the costs and expenses incurred in taking legal advice and defending an action in court can be substantial.
It is worth noting, the new discount rate applied to personal injury claims to account for the future investment return of a lump sum compensation payment.
With the percentage linked to returns on low risk investments, the rate reduction reflects that claimants may be financially dependent on their lump sum, often for long periods.
How much product liability cover should you purchase?
The limit of product liability insurance you purchase will depend on your business activities, perception of the exposure and how much you are prepared to spend to mitigate the risk.
The type of products you produce will likely impact your decision. For example, if you are a clothing manufacturer, the risk of injury or damage to property is far less than if you are a fireworks manufacturer.
The minimum cover typically offered is a £2 million limit. However, the risk of personal injury is significant, therefore businesses typically purchase a minimum of £5 million or £10 million limit.
What is product recall insurance?
Product recall insurance is a separate and specialist product which can be purchased in conjunction with product liability insurance. It offers protection not just for the financial loss of a product recall but cover for damage to your brand and reputation.
There are a number of industry specific products available that include:
> Automotive recall insurance
> Consumer products
> Contaminated food & drink insurance
> Pharmaceutical recall insurance
Cover can be tailored to the unique exposures of a wide range of industries. As a specialist product liability insurance broker, we have the experience to identify the most appropriate cover for your business.
How to compare product liability insurance cost?
Product liability insurance quotes can typically be made available with 48 hours of completing our online application. However, every manufacture, wholesaler or distributor business model is different, and we may require further information dependent upon your business activities.
At get indemnity we continue to see stable market conditions for product liability insurance cost, driven mainly by an abundance of insurer capacity.
If you operate a high hazard exposure or you have recent claims activity, you should engage with your product liability insurance broker early to achieve a satisfactory renewal.
This guide is for information purposes and based on sources which we believe are reliable, the general risk management and insurance information is not intended to be taken as advice with respect to any individual circumstance and cannot be relied upon as such.