What Is Product Liability Insurance?

Product Liability Insurance is a type of commercial insurance that can protect a business against qualifying legal liability claims where a product it manufactures, supplies, imports or sells causes injury to another person or damage to their property.

Even if your business did not manufacture the product, you could still face allegations or legal responsibilities arising from products supplied to customers.

Product Liability Insurance can provide cover for eligible compensation payments and associated legal defence costs, subject to the insurer’s terms, limits and exclusions.

It is particularly relevant to businesses involved in manufacturing, wholesale distribution, importing, retailing and e-commerce.

What Does Product Liability Insurance Cover?

The protection available depends on your business activities, the products supplied and the insurer’s policy wording.

Important: Product Liability Insurance does not automatically cover the cost of replacing a defective product, issuing refunds or recalling products from the market. These exposures may require separate insurance.

Who Needs Product Liability Insurance?

Product Liability Insurance can be relevant to businesses throughout the supply chain, not just manufacturers.

Examples of Product Liability Claims

Product liability claims can arise in many different circumstances.

These are illustrative scenarios only. Whether a claim is insured depends on the circumstances and the applicable policy wording.

Public Liability vs Product Liability Insurance

Public Liability and Product Liability Insurance are closely related, but they protect against different types of exposures.

Many commercial insurance policies combine Public Liability and Product Liability cover, but the limits, exclusions and applicable conditions should be checked separately.

Product Liability Insurance for Importers

Importing products can create additional responsibilities and insurance considerations.

Depending on the circumstances and applicable product safety legislation, a UK importer may have legal responsibilities relating to products manufactured outside the country.

Insurers may want to understand:

• Which countries the products are manufactured in.
• The types of products imported.
• Whether the products are sold under your own brand.
• What product testing and quality assurance procedures are in place.
• Whether the products comply with applicable UK product safety requirements.
• Whether products are also exported or sold internationally.
• Any previous product defects, complaints or claims.

Accurate disclosure of product origin, distribution arrangements and intended markets is important when arranging insurance.

Product Liability Insurance for Online Retailers

Online businesses can face product liability exposures even where they do not manufacture the products they sell.

This includes businesses selling through their own e-commerce websites and third-party marketplaces.

Some online platforms or commercial customers may require sellers to maintain specified levels of liability insurance.

Insurers will usually need details of the products sold, where they originate and the countries in which customers are located.

Businesses selling products internationally should pay particular attention to territorial limits and jurisdiction provisions, especially where products are supplied to the USA or Canada.

Does Product Liability Insurance Cover Product Recalls?

Standard Product Liability Insurance does not normally provide comprehensive protection for the costs of recalling defective products.

A product recall can involve expenses such as:

• Identifying and notifying affected customers.
• Removing products from sale or circulation.
• Transporting and storing recalled products.
• Testing, repairing or disposing of defective goods.
• Managing certain recall-related communications.

Specialist Product Recall Insurance may be available for eligible businesses and products.

It is important to distinguish between liability for injury or damage caused by a product and the cost of withdrawing the product itself.

Is Product Liability Insurance a Legal Requirement in the UK?

Product Liability Insurance is not generally a compulsory insurance requirement for every UK business.

However, businesses may face legal liability for defective products under applicable consumer protection and product liability laws.

Commercial contracts, customers, suppliers and online marketplaces may also require specified insurance limits.

Even where insurance is not legally compulsory, the potential cost of defending a product liability claim can make suitable protection an important consideration.

How Much Product Liability Insurance Do I Need?

The appropriate level of cover depends on the products you supply, their potential to cause injury or damage, and any contractual requirements.

Product Liability Insurance limits are often available at levels such as £1 million, £2 million, £5 million or higher, subject to insurer appetite.

When selecting a limit, consider:

• The type and intended use of your products.
• The potential severity of injury or property damage.
• Whether your products are used in safety-critical applications.
• The number of products distributed.
• Contractual requirements imposed by customers.
• Whether products are sold internationally.
• Whether the policy limit applies per occurrence or in the annual aggregate.

Product Liability limits commonly operate on an aggregate basis, meaning the maximum amount payable may apply across all insured claims during the policy period. The exact wording should always be checked.

How Much Does Product Liability Insurance Cost?

Premiums vary depending on the nature of the products, your business activities and the potential liability exposure.

Reducing Product Liability Risks

Insurance is one part of managing product-related risks. Appropriate quality control and product safety procedures are also important.

Depending on your business, useful measures may include:

• Maintaining suitable quality control procedures.
• Checking products against applicable safety standards.
• Providing appropriate instructions and warnings.
• Maintaining product testing and inspection records.
• Keeping records of suppliers and product batches.
• Investigating product complaints and reported defects.
• Maintaining suitable product traceability arrangements.
• Establishing procedures for responding to product safety incidents.

Insurers may ask for information about these measures when assessing products that present more complex exposures.

What Does Product Liability Insurance Not Cover?

Product Liability Insurance policies contain exclusions and conditions that should be understood before cover is arranged.

Common exclusions or restrictions may include:

• The cost of repairing or replacing the defective product itself.
• Product recall and withdrawal expenses unless separately insured.
• Pure financial losses where there is no insured injury or property damage.
• Contractual liabilities beyond those covered by the policy.
• Products or activities not disclosed to or accepted by the insurer.
• Claims arising in excluded territories or jurisdictions.
• Certain specialist or hazardous products.
• Deliberate acts and other excluded circumstances.

Cover can vary significantly between insurers, particularly for imported products, specialist manufacturing and international sales.

What Information Is Needed for a Product Liability Insurance Quote?

To help us approach appropriate insurers, we may request:

• A description of the products you manufacture, import or sell.
• Your annual turnover and projected sales.
• Whether you manufacture, import, distribute or retail the products.
• The countries where products are manufactured.
• The countries where products are sold or used.
• Any products sold under your own brand.
• Details of product testing and quality assurance.
• Previous claims, defects or product recalls.
• Required insurance limits and contractual obligations.

Providing accurate and complete information helps insurers understand your products and assess the risk appropriately.

Why Choose Edison Ives for Product Liability Insurance?

Product liability risks can vary significantly between businesses. A manufacturer producing industrial components will have different exposures from an online retailer importing consumer goods.

At Edison Ives, we take time to understand the products you supply, your position in the supply chain and the markets in which you operate.

We can help you explore insurance arrangements through appropriate commercial and specialist insurers.

Our approach includes:

• Insurance options for manufacturers, importers and retailers.
• Consideration of specialist and higher-risk products.
• Review of relevant territorial and jurisdiction requirements.
• Clear explanations of important exclusions and policy limits.
• Support with contractual insurance requirements.
• A dedicated point of contact and broker support during claims.

Speak to Our Commercial Insurance Team

Call 0113 390 4646

Email info@edinsure.co.uk