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Product Liability Risk Management Explained 1O1

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Product liability risk can attach to any business that designs, manufactures or supplies products to their customers

Maintaining sufficient knowledge about the legal landscape, your responsibilies and how to manage your product liability risk is an important consideration, in addition to purchasing product liability insurance

Below we take a closer look at the responsibilities placed on business and what they should consider when managing their product liability risk.

Product liability 'duty of care'

Product liability is governed by legislation and regulation. 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 property.

Product liability risk management

The best time to build in sufficient safeguards to guard against potential product liability claims is in production and development. Consideration should also be made to the following product liability risk management controls:


Transfer of legal liabilities

Can assist your business reduce product liabilities caused or contributed by others. 1) Hold harmless agreements help ensure your suppliers are contractually responsible for their own negligence. 2) Evidence from suppliers they have sufficient product liability insurance in place.


Management of imported goods

Businesses that import products, components and raw materials may be held responsible for safety requirements. Importers should gather and retain information to ensure imported products comply with the applicable standards and regulations to guard against product liability claims.


Keep essential records on file

Copies of customer design specifications, product orders, including customer agreement. Written procedures that describe the flow of the product through the manufacturing process and quality control. All of which will provide evidence if product liability allegations arise.

When designing products, a safety review should consider how a product will be used and the potential hazards. They should comply with all safety standards, which include labels, warnings and instructions.

Product liability and consumer safety

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 manage your product liability risk:

>  Provide product 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 product safety concerns be identified.
>  Retailers should take reasonable steps to ensure the safety of the products sold and identify the sources.

A formal product risk management system will provide value in supporting a defence against product liability claims arising from injury or property damage as a result of a fault with a product you have provided.

What are the product liability laws in the UK?

Product liability and safety in the UK are governed by a regulatory framework consisting of both national and European-derived legislation. 

However, post-Brexit 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:

>  UK law on the design and supply of products
>  European Community law on the supply of new products

Although the product liability and 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, machinery, fireworks, food and medicines, 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.

Product liability risk and responsibilities

A safe product offers either 1) no product liability risk; or 2) a minimum acceptable level of product liability risk, taking into account reasonably foreseeable use of the product and the need to maintain a high level of protection.


Product producer

As a product 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).


Product distributor

As a product 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 business insurance to meet your specific requirements. Call one of our account executives to discuss your product liability needs.


Product liability and risk management posted by Get Indemnity™ 

This guide is for information purposes and based on sources 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.