Product liability insurance, which is typically sold as part of a business liability package, protects your company against third-party claims for personal injury or property damage caused by a product imported, manufactured, designed, sold, or distributed by your company. The costs of compensation and legal fees incurred as a result of the claim will be covered by product liability insurance.
Property repair or replace lost income due to an accident, or medical expenses may all be covered by compensation payments. A claim can be filed by any third party, even if they did not purchase the merchandise.
The responsibility of product liability falls primarily on the manufacturer; however, under the Consumer Protection Act, a producer, supplier, distributor, or retailer may be held liable in a legal suit. Even if you did not create the product, if the manufacturer is no longer in business, you may be held liable as the seller.
What is the working for product liability insurance?
When a defective product causes personal injury or property damage, the victim has the right to sue the person or business responsible for the defect. However, determining guilt is not always straightforward. The manufacturer is the default target, but anyone in the supply chain could be held responsible.
A UK food company delivers lamb sausages to a grocer. A UK company imports the lamb from New Zealand, and the sausages are labeled as the supermarket’s own brand. A haulage company transports the sausages from the factory to retail outlets.
Several food poisoning incidents have been linked to lamb sausages. Who is liable
The store provides documentation to prove compliance with the food hygiene protocol. They claim that the product was faulty before they received it.
The haulage company creates documentation to demonstrate compliance with food hygiene protocols. They claim that the product was handled strictly in accordance with the manufacturer’s specifications.
The manufacturer provides documentation to prove compliance with the food hygiene protocol. They claim that the meat was tainted when it arrived.
In addition, the importer provides documentation demonstrating compliance with food hygiene protocols.
If it is proven that the meat was contaminated before it arrived at the manufacturer, the importer is held liable as the first handler in the UK. If the product deteriorates while in transit, the haulage company and/or the store may be held liable. If the meat became contaminated during the manufacturing process (storage, internal transportation, handling, packing, and so on), the manufacturer may be held liable, and the merchant may also be held liable due to brand ownership.
What kind of company would need product liability insurance?
Businesses that sell or handle products must have product liability insurance. These are:
Producers are individuals who collect and sell raw materials
Manufacturers are those who create products from raw materials and/or components manufactured by other manufacturers. When a supplier of component parts or materials cannot be located or is no longer in business, the manufacturer is held accountable.
Distributors are those who act as a liaison between the producer/manufacturer and the retailer.
Retailers sell manufactured goods or fresh commodities to customers. A retailer’s product liability insurance is especially important if the goods are own-branded, as they are held to the same standards as the manufacturer in this situation.
Shippers are people who transport materials and products.
Restorers and maintenance workers are individuals who modify, restore, or acclimate a product.
A service-only business, such as an accountant, copywriter, sports coach, or architect, does not need product liability insurance. They would, however, need public liability insurance and may want to look into other business-related insurances like professional indemnity insurance.
What is the primary difference between product liability insurance and public liability insurance?
Public liability insurance, like product liability insurance, covers defense costs as well as third-party legal liabilities. The similarities, however, end here.
In the event of a claim for bodily injury or property damage caused by the insured while providing services, public liability insurance protects the insured.
In the event of a claim for personal injury or property damage caused by a product manufactured or provided by the insured, product liability insurance protects the insured.
The incident that gives rise to a public liability claim happens while the insured person is providing a service.
Product liability claims can be brought up to three years after the alleged injury or damage occurred.
What does product liability insurance cover?
Product liability insurance covers third-party claims for bodily harm or property damage caused by a product. The cover features the following elements:
- There is legal representation available.
- Compensation is paid to the person who filed the claim.
What level of cover do you require?
Both public and product liability insurance cover claims for bodily injury or property damage caused by a company’s services or products.
When purchasing product liability insurance, consider the potential importance of a compensation claim, and double-check client contracts for any mandated levels of product liability insurance.
Another factor to consider is the level of danger. Implementing mitigating measures lowers the chances of a product causing damage to a person or property.
If your product is installed by a qualified expert, handled carefully, or stored at a low temperature, it is critical to provide proper instructions and keep records as proof that the instructions were followed.
Always seek advice on rules that apply to your goods. Investigate any applicable safety regulations and consider changing your product to meet these specifications.
Maintain detailed records of who supplied the items, when they were supplied, and how they were delivered in the case of own-brand items.
Do you require product liability insurance by law?
Product liability is not required by law. Some suppliers, distributors, and retailers, on the other hand, will require product liability insurance from their partners. Remember that there is no upper limit to a potential payout, so filing a claim could be disastrous for a small business.
How much does product liability cost?
The cost is primarily determined by the nature of the business and the products offered, as this determines the amount of coverage needed, as well as where your products are marketed, supplied, or manufactured.
