Product Liability Insurance

What is product liability insurance?

Product liability insurance protects the policyholder against claims made against them in respect of their legal liability for personal injury or property damage arising from the supply of a product. In addition to the cost of any awards made against the policyholder the policy also covers the cost of any legal defence of a claim.

How much product liability insurance do I need?

Under a product liability policy there is a limit of indemnity that you choose when you take out the policy. This limit is the maximum amount that an insurer will pay out in a single policy year in respect of all claims under the policy. This contrasts with the limit of indemnity under a public liability policy where the limit is generally in respect of each and every claim. The limit of indemnity under product liability insurance is referred to as “in the aggregate”. This may be an important factor when you decide the level of cover your require under the policy.

The “standard” limits under most policies that are issued are £1M, £2M and £5M, although other levels are available and there is an increasing number of requests for a limits of £10M and even higher.

The limit you require under a product liability policy may be driven by the contractual requirements of others.

Does product liability insurance cover defective products?

This is a common question and is in fact misleading in itself. The product liability policy is a legal liability policy where property damage or personal injury must occur as the result of the supply of a product.. There is no requirement that the product be defective albeit this is a common cause of claims.

It is the extensive and inappropriate use of the word “defective” whilst discussing product liability that causes confusion with many as regards whether the contract provides some sort or product guarantee which it does not.

Who needs product liability insurance?

Any person or business who supplies a product is exposed to the threat of legal action against them as the result of a personal injury or property damage arising from the supply of that product.

In the event of a claim the first port of call for any injured party will be the supplier of that product. Insurers will follow the supply chain upwards to seek redress from the party responsible which could be a wholesaler or manufacturer and in many cases the claim will be taken over by the party ultimately responsible. However, there are circumstances where this will be not be possible and as such the claim will rest with the supplier.

How do I buy product liability insurance?

Whilst product liability is a distinct class of insurance it is not generally available on it’s own. It is generally provided as an extension or additional section on a public liability insurance policy or as part of a package insurance.