Product liability insurance covers the cost of compensating anyone who is injured by a faulty product that your businessdesigns, manufactures or supplies.
Do I need it?
You should consider product liability insurance if your business designs, manufactures or supplies a physical product that is sold or given away for free.
Your businessmay be heldlegally responsible for any injuries to people or damage to property caused bya faultyproduct.
You can be held liable for faulty products even if you did not manufacture them. You may be liable for compensation if:
- your business’s name is on the product
- your business repairs, refurbishes or changes a product
- you imported the product from outside the European Union
- you cannot identify the product’s manufacturer, or the manufacturer has gone out of business
What it covers
Product liability insurance protects you against thecost of compensation for:
- personal injuriescaused by your faultyproduct
- loss of or damage to property caused by your faulty product
- unforseeable circ*mstances such as product faults that your quality control system could not identify
Product liability insurance may not cover you for:
- faulty products resulting from bad workmanship
- financial losses to a business or person caused by your faulty product
If you do not manufacture the product but you distribute it, you should be covered if you can show that:
- the products were faulty when they were supplied to you
- you gave customers adequate safety instructions and warnings about misuse
- you included terms for the return of faulty goods to the manufacturer
- your supply contact with the manufacturer covers product safety, quality control and returns
- you have good quality control and record-keeping systems
Buying product liability insurance
You can buy product liability insurance directly from an insurer or from a specialist broker through the British Insurance Brokers’ Association (BIBA). Most businesses take out policies that cover them for compensation claims of between £1 million and £5 million.
For more information on business insurance see theABI guide to insurance for small businesses (pdf 466kB).
FAQs
Product liability refers to the legal liability of manufacturers or sellers to compensate buyers, users and even bystanders for damages or injuries suffered because of defects in goods purchased.
How do you solve product liability? ›
5 Steps for Product Liability Risk Management
- Transfer risk through management of suppliers. ...
- Managing supplies and imported goods. ...
- Build safety into design. ...
- Keep essential records. ...
- Enable and review customer feedback.
Product liability insurance is worth it if your company sells any physical product. It will help to cover your expenses if your company is sued because your product caused injury to a person or their property.
How to estimate product liability insurance? ›
On average, product liability coverage for low-risk categories is $0.25 per each $100 in revenue. So, for example, depending on the type of product you make, if your company earns $500,000 in sales, your product liability could cost about $1,250.
What is product liability for dummies? ›
Product liability is a doctrine that gives plaintiffs a cause of action if they encounter a defective consumer item. This doctrine can fall under negligence, but it is generally associated with strict liability, meaning that defendants can be held liable regardless of their intent or knowledge.
How do you prove product liability? ›
You must prove that the product's defect directly led to your injury or losses. This is not the same as simply showing you were injured while using the product. Your attorney will help you take this a step further to show that the product's defect led to your injuries.
What is an example of a product liability statement? ›
Effective Product Liability Disclaimers
Here is an example of an explicit disclaimer: "In no event shall our company be liable for any direct, indirect, punitive, incidental, special, consequential damages to property or life, whatsoever arising out of or connected with the use or misuse of our products."
How do you defend against product liability? ›
Therefore, one avenue open to a defendant in a product liability case is to argue that the harm suffered by the plaintiff was a result of using the product in an unexpected and unforeseeable way. Thus, misuse can serve as a defense against liability. The misuse, however, must be unforeseeable.
What is an example of a product liability claim? ›
So, for example, if your vehicle veered off the roadway because of a faulty steering, you would have a product liability claim only if you can show evidence that your accident and resulting injuries were caused by the steering defect, not because of a mistake you made.
What is an example of product liability insurance? ›
For example, let's say a customer buys a power tool that your business manufactures. A defect in the tool ends up injuring the customer, and they sue your business. Your general liability insurance policy's product liability insurance helps cover: The customer's medical costs to treat their injury.
Product Liability Cover for Public:
Procuring a product liability insurance cover is mandatory only in some countries. But it's advisable that industries, having an impact on third parties including entertainment, food and beverage industries etc. should buy it, to protect themselves against any unnecessary risk.
What is the difference between product liability and warranty? ›
Thus, a statement by the seller with respect to the quality, capacity, or other characteristic of the goods is an express warranty. For example, “This shirt is 100% cotton.” Products liability refers to the liability of any or all parties along the chain of manufacture of any product for damage caused by that product.
Who should have product liability insurance? ›
You should consider product liability insurance if your business designs, manufactures or supplies a physical product that is sold or given away for free. Your business may be held legally responsible for any injuries to people or damage to property caused by a faulty product.
What do product liability claims typically cover? ›
Manufacturing defects are the most common cause of product liability claims. A product liability lawsuit based on a manufacturing defect alleges that the original design of the product is completely safe but that something happened during the manufacturing process to make the product unsafe.
How common are product liability cases? ›
All told, in 2019, the total number of product liability case filings spiked to 56,041, up considerably from the 43,457 recorded in 2018. Even when excluding MDL-associated cases, the uptick holds, from 4,943 in 2018 to 5,261 in 2019.
What are the 4 doctrines of product liability? ›
The primary theories for recovery include the following: negligence, tortuous misrepresentation, breach of warranty, and strict liability in tort. Tort Theory of Negligence: The tort of negligence remains a central part of the law of products liability.
What does product liability mean for a company? ›
Product liability is the area of law in which manufacturers, distributors, suppliers, retailers, and others who make products available to the public are held responsible for the injuries those products cause.
What is a liability answers? ›
A liability is something that a person or company owes, usually a sum of money. Liabilities are settled over time through the transfer of economic benefits including money, goods, or services.
Does product liability mean that a manufacturer is liable? ›
Product liability means that a manufacturer is liable for any injuries or damages caused by a faulty product because of poor workmanship or design.
