Product liability insurance is usually offered as an add-on to your public liability insurance policy or combined business insurance package. It extends your liability cover to include protection against any claims of personal injury or property damage that result from use of your physical products.
Do I need product liability insurance?
Though not a legal requirement for businesses, it is certainly worth your consideration if you are involved in the design, manufacture, distribution or supply of products to a third party – such as customers or the general public.
It’s a common misconception that the sole responsibility over the safety of the product lies with the manufacturer alone, and any issues that may arise from an inferior product should be taken up with them. Whilst the manufacturers absolutely do have a duty to manufacture quality products, the retailers, wholesalers, suppliers, and distributors also have a legal responsibility to assess the quality of said products before they ever end up in the hands of a third-party. Not to mention that the country in which the products are made may not be the United Kingdom, and will therefore not necessarily comply with our standards of quality assurance and regulations. As the retailer, you have a responsibility to ensure that any goods you supply are safe.
And even then…
You may place your complete faith in the quality of your product, but there is never any guarantee that nothing will go wrong. Accidents happen. It only takes a single faulty product—out of the hundreds, thousands, or even millions that you have supplied—to financially cripple your business. Claims of personal injury can be incredibly expensive. Even if you are found to not be at fault, the legal defence costs alone could put your business at risk.
It’s for this reason that product liability insurance is usually recommended for such businesses. In the long-term, it could cost you a fortune if you neglect to insure against defective products. Expensive claims can arise from the tiniest of errors or defects.
What does product liability insurance cover?
Different product liability policies will cover different things, but most commonly:
- death or injury caused by your product
- illness caused by food or drink that you supply
- loss or damage of personal property caused by your product
There is no upper limit to compensation claims brought against the supplier, and will depend on the severity of the case. The slightest oversight could be enough to bring a good company to its knees. You should also ensure that you maintain your cover even during gaps of inactivity, as claims can be brought up any time within three years of product use or three years after the injury had become reasonably apparent to the claimant (but not more than ten years after the product was first supplied to the consumer). You may no longer be trading, but someone who suffers injury using your product in future can still make a claim against you.
It’s worth noting that product liability insurance will only guard you against those unforeseen circumstances in which you generally produce or supply to the highest quality of your ability. If you knowingly disregard the safety and quality of the product, then this type of insurance policy isn’t going to protect you from your own negligence. It will be very difficult to make a claim if you are found to have not taken the appropriate measures of quality control to prevent such accidents.
What if I sell products online?
Some merchants may think they’re safe behind a computer screen, but you’re just as at risk of distributing a faulty or contaminated product as any physical brick-and-mortar store. Online customers can still make a claim against you if they become injured, ill, or have their property damaged as a result of your product. Online retailers shouldn’t ignore the risks and responsibilities associated with manufacturing, supplying and/or distributing products to customers.
By purchasing product liability insurance, at least you can confidently manufacture and supply products to customers secure in the knowledge that your insurance is safeguarding your business.