Understand how to secure for product liability insurance to protect against liable claims from injury or property damage from a product fault. Many businesses do not appreciate some of the complexities in finding an appropriate policy which meets their needs.
If you design, manfacture or only sell goods you should consider product liability insurance to protect your business from liable claims arising from bodily injury and property damage. Product liability cover is never offered in isolation and will typically be combined with public liability insurance.
Product liability insurance is financial protection for businesses against liable claims arising from injury or property damage as a result of a fault with a good you have provided.
Product liability insurance is commonly purchased by businesses which design, manufacture, or supply goods to their customers. Cover will commonly be bought under commercial combined insurance.
The cover is still required by businesses that only distribute goods, and not manufacture. You may have a claim against the manufacture of the product, but your business could be held legally liable.
Although not a legal requirement in the UK, product liability insurance should be considered by every business that manufactures, designs, distributes or supplies goods to customers. Consider whether you need an insurance broker to arrange policy cover on behalf of your business.
Understand the types of liability and property insurance covers typically bought by manufacturing business to protect their interests.
Understand what policy covers are available to protect against damage or loss of stock, buildings, and equipment, in addition to covering liabilities.
Different product will carry a greater degree of risk. For example, goods designed for children are challenging because of the high awards of damages.
The company's turnover will be indicative of the insurer's exposure, a greater volume of goods increases the potential incidence of bodily injury.
Goods sent to the USA or Canada can increase your liability cost due to the size of the compensation awarded provided by the courts.
Materials or goods produced in Asia and other countries can restrict your ability to hold the supplier to account and increase your insurance cost.
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.
Liabilities for products is governed by legislation and regulation. Goods sold to consumers and commercial customers under The General Product Safety Regulations 2005 are required to be 'safe'. Potential liable claims can arise from anyone injured or who has suffered damage to property.
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.
Under the Consumer Protection Act 1987, manufacturers, distributors, suppliers, and retailers can all be held liable for damage, personal injury or death for providing defective goods to consumers.
Claims under the Act are generally brought against the product ‘producer’, which is generally regarded as the company that has their name on the product, however there can be a number of exceptions.
The most common exception is if the product has been imported to the UK from outside of the EU, the importer is then regarded as the producer. However, there are other circumstances we discuss below.
Public liability and product liability insurance is always purchased together for commercial activities, insurers will not offer cover for injury or property damage from a product fault in isolation. However there maybe additional policy covers, such as cargo insurance that your business should also consider.
Public liability insurance will protect against injury or property damage of persons in the course of your business activities (i.e., slips, trips and falls).
Employers' liability insurance is a legal requirement and offers protection from injury or illness compensation claims.
Any business who supplies goods is responsible for their safety and should therefore consider product liability insurance to protect their financial interests. The level of responsibility and potential liability will depend on whether you are involved in the manufacture of the goods, or whether you are just involved with the distribution.
There are a number of circumstances where your business can still be wholly responsible from injury or property damage as a result of a fault with a product: (1) you repair or repurpose; (2) rebrand the goods; (3) overseas materials are used; (4) you commission the product; (5) manufacturer is out of business or unidentifiable; and (5) they have a hold-harmless agreement with yourself.
The amount of product liability insurance you purchase will depend upon your activities, goods, perception of the exposure and how much you are prepared to spend to mitigate the risk. The type of goods 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.
Product liability insurance isn’t a legal requirement in the UK. However, you may find that manufacturers, suppliers, distributors or retailers, will require you to buy the cover and provide a certificate of insurance. It is also worth consider, even if you don't have any contractual requirements because the policy cover can offer financial protection in the event you are accused of causing injury or death as a result of a good you supplied or manufactured.
Product liability insurance will cover the cost to defend, and damages awarded to compensating anyone who is injured by a faulty good that your business designs, manufactures, distributes, or supplies.
They will both offer cover for compensation claims as a result of injury or property damage, however the cover will respond in different situations. Product liability insurance specifically covers claims that result from a defective product, whereas public liability insurance will cover more general allegations (i.e., a visitor that falls and injuries themselves at your premises).
Your business must ensure a level of care has been taken to keep the consumer safe. The below offers several measures that can help manage your liability risk: (1) Provide information to help consumers understand the risks; (2) Provide sufficient warnings of potential risks and dangers of improper use; (3) Effectively monitor and report on the safety issues; (4) Take early remedial action should product safety concerns be identified; (5) Retailers should take reasonable steps to ensure the safety of the goods sold and identify the sources; (6) A formal product risk management system will provide value in supporting a defence from injury or property damage as a result of a fault with goods you have provided.
Often, the most challenging and expensive part of a recall is keeping the business operational while facing intense public and regulatory scrutiny.
There were 693,000 non-fatal injuries to workers reported in 2019/20, with slips and trips accounting for nearly one third of all incidents.