What is Product Liability Insurance?
Even when a product has been designed to the highest standards using the best quality materials, things can still go wrong. Product liability insurance is designed to cover the cost of compensating someone who claims to have been injured by a product that your business designed, manufactured or sold. It can also protect you from the legal fees associated with your defence of a claim. If you make or supply products to the general public it’s your responsibility to make sure they’re safe. You also must comply with health and safety and product safety laws – otherwise you may face legal action.
Does my business need product liability insurance?
Your products may well be subject to certain quality standards by law, but product liability insurance isn’t a legal requirement in the UK. That being said, defending a claim, or the business being instructed to pay out compensation, can be extremely expensive. Product liability insurance protects you and your company against the legal and compensation costs associated with:
- Death or personal injury caused by your product
- Loss of or damage to property caused by your product
- A product being classed as faulty
This means that in the event of a claim and you have the right indemnity levels in place, your business won’t be out of pocket in the event of a claim.
Who is liable in the event of a product liability claim?
A product liability claim could be brought against any business that is deemed to have:
- Designed or manufactured the product
- Designed or manufactured a component part of the final product which was then found to be faulty
- Trade marked a product or put your business’s name to it
- Changed, updated or repaired a product
- Supplied the product but can’t identify the manufacturer or the manufacturer is no longer in business
- Are responsible for a production process which directly provides a particular characteristic of the product
Your business can still be held liable for faulty products even if you only designed them but did not manufacture them or if you gave them away for free.