What is product liability insurance?
Under United Kingdom law, businesses are under certain legal requirements. Where the business is an employer, there is a legal requirement to have valid Employers Liability Insurance in force. There is no such legislation enforcing businesses to take our product liability insurance.
Product liability is very similar to public liability, the two covers usually run side by side.
If a product causes injury, illness or disease to a third party person, or persons, due to a defect in the product, this would fall under product liability insurance. This cover would also extend to include damage to third party property caused by the product.
Although there is not a legal requirement to take out this cover, UK common law applies. It would need to be proven that the manufacturer of a product was negligent and this caused the product to be defective.
Public and product liability claims examples
Understandably, product liability only applies to the physical product and the damage &/or harm it causes. Public liability is concerned with damage &/or harm caused by the business activities.
A builder is using a power saw to cut through a piece of wood, at a client’s house. If they cut through a water pipe, at the same time, this is public liability. The saw has not caused any damage through a defect. This was down to the negligence of the worker, in not checking what pipes they might cut through.
In the above scenario, whilst cutting the wood, the blade on the saw cracked. Part of this blade damaged a plate glass window. If it can be proven that the wrong metal was used in the blade, this is negligent manufacture, and would be product liability.
Who needs to take out product liability insurance?
We’ve mentioned above that it is the manufacturers who are ultimately responsible. In very simple terms, wherever the financial relationship occurs, the product liability responsibility lies. For example, this may be the manufacturer, distributor, supplier or retailer.
If you buy a product from a high street shop, they may have purchased this from a wholesaler. This wholesaler may be in the UK and they may have imported the product.
A financial relationship exists between the customer and the retailer. If the product causes injury to the customer, they can make a claim against the retailer. It is immaterial to the customer where the product was made. The insurers of the retailer may choose to pursue a claim against the wholesaler. If this proceeds, the wholesalers insurers may choose to claim against the manufacturer.
The UK retailer cannot simply pass off the claim to their supplier. For this reason, whilst it is not legally required, it is important for any business supplying products, to have adequate cover in force.
It is not just retailers this applies to, manufacturers, wholesalers, leisure businesses and charities, to name but a few, may need to take out product liability insurance.
As with all insurance covers, we can only provide general information. You will need to speak to a business insurance broker, for advice on your specific insurance requirements.
You can also visit this useful link to UK Government advice for businesses involved in the supply of products.