What is product liability insurance?
Product liability cover is a type of insurance that may be useful if your business operates in sectors such as retail or technology.
It can offer protection if someone makes a claim for an injury, or even damage, caused by a defective product that your business is involved with.
A business could face a claim no matter where its role comes in a product’s life cycle. You might be the manufacturer, involved with supplying the item or the owner of the retail store where the product was sold. Equally, your business might specialise in servicing musical instruments or machines or installing hardware.
For instance, an electrical retailer may be taken to court for selling kettles which cause scalding injuries due to defective thermostats. Alternatively, a retailer selling ready meals may face legal action if a batch becomes contaminated, causing customer illness.
In circumstances such as these, product liability insurance can step in to protect your business against the cost of defending and settling claims.
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Product liability insurance – our guide
Product liability cover is built into a public liability insurance policy – watch our short video guide to find out more.
All you need to know about product liability insurance
Do I need product liability insurance?
Product liability insurance might be a key consideration for any business involved in the design, production, alteration, repair or supply of products to customers. If you sell, distribute, manufacture, construct, install, test, service, maintain, clean or treat products as part of your work, product liability can help offset the risks your business faces.
You may only be one part of a product’s supply chain, however, you could still face a claim if a defect is discovered and causes injury or damage.
Product liability cover is appropriate for many different types of businesses. An electrician may fix a toaster which later malfunctions and causes serious injury.
Alternatively, a children’s toy retailer may sell a ride-on truck that is found to have an abrasive surface. Or a self-assembly wardrobe may collapse and cause injury due to inadequate or missing instructions.
The cost of legal defence and paying compensation can prove damaging for a small business without insurance – that’s where product liability cover can step in.
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How much product liability cover will I need?
Calculating how much product liability insurance your business may need involves working out the maximum cost of a potential claim. This will depend on the types of product you design, manufacture, repair or sell and the level of risk involved if something goes wrong.
Product liability insurance can cover the cost of defending and settling claims relating to illness, injury or damage to property caused by a faulty product.
We can add a product liability policy to your public liability insurance and tailor your cover with the level of protection your business may need – up to £10m if required.
Failing to meet regulations in this area can bring criminal claims too, so we can also cover legal defence costs up to £100,000.
What’s included in your product liability cover?
We’ll cover you for:
- Up to £10 million of cover – the cost of defending a claim and any compensation you’re ordered to pay is covered by public and product liability insurance. This extends up to the level of cover you select for your business.
- Legal defence costs up to £100,000 – if someone makes a criminal claim against your business – for instance, for breaking the law or failing to meet regulations – we’ll help with the legal fees.
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When should I get product liability insurance?
You might consider getting product liability insurance as soon as you intend to start handling any products.
Product liability insurance is an extra layer of cover which is combined with a public liability policy and can be important if you work as part of a supply chain.
Therefore, whether you’re a manufacturer, supplier or retailer, having cover could become relevant as soon as you start creating, supplying or selling products to the public.
From small, independent retailers to large-scale manufacturers, a policy could provide welcome reassurance.
Product liability insurance: FAQs
What’s the difference between public and product liability insurance?
Public liability insurance can cover a business for legal costs, compensation and expenses if someone claims they’ve become injured, or their property damaged as a result of your business activities.
Product liability is a similar type of insurance, however, it offers financial assistance with claims arising from injury, illness or property damage due to a defective product you’ve designed, manufactured, repaired, serviced or sold.
Although they provide cover for different things, these products work together. Product liability acts as an additional layer of protection as part of a public liability policy.
Is product liability a legal requirement?
Although product liability insurance isn’t a legal requirement, it could provide important cover for any business involved in the supply chain of a product.
You could face legal proceedings if a defective or faulty product causes injury, illness or property damage. Without appropriate cover, this could result in negative financial implications for your business.
Additionally, when you’re looking for suppliers, manufacturers or retailers to work with, you may find a product liability policy to be a contractual requirement.
Who is liable for damage or harm caused by a defective product?
Harm caused by a defective product – and liability for it – could potentially be attributed to any business within the supply chain.
Each case will have its nuances and this evidence will be used to identify which party is to blame. For instance, if a product is faulty, the blame may fall with the manufacturer, but if a faulty element in the product came from a supplier, the supplier or both parties may be liable. Meanwhile, a contaminated food product causing illness could mean both manufacturer and retailer are liable for failing to take necessary precautions.
Product liability insurance: articles and guides
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