This blog will be dedicated to product liability insurance. Product liability insurance covers the cost of compensating anyone who is hurt by a product manufactured, designed, or supplied by your company when the injury can be proven to be caused by a flaw in that product.
What is the point of product liability insurance?
If you manufacture or sell products to the general public, you must ensure that they are safe. Many items are subject to health and safety regulations as well as product safety rules. It is critical that you ensure that you are in compliance with these rules if you are making or selling products.
The Consumer Protection Act of 1987 (‘CPA') provides consumer protection. The primary obligation rests with the product's maker, although merchants and wholesalers are also legally obligated. Primarily, you must ensure that the things you manufacture or offer are safe, or you risk facing legal action.
While you may take every step to ensure that your products satisfy the essential safety requirements, it is possible that your products will injure or harm someone or their property. If your company manufactures, creates, or sells physical products, you should consider purchasing product liability insurance to protect yourself.
What does Product liability insurance protect?
Product liability insurance protects you/your organisation from the costs of resolving:
death or personal injuries caused by your goods; loss or damage to property in excess of £250 caused by your goods; and unforeseeable circumstances such as product flaws that your quality control system was unable to detect.
What doesn’t Product liability insurance protect?
However, product liability insurance may not protect you for the following situations:
flaws caused by poor workmanship or design; or financial damage to a firm as a result of your faulty goods.
Who is liable?
You can be held liable for defective products even if you did not manufacture them or provided them for free.
You may be liable for compensation if you do any of the following:
- Manufactured or developed the product;
- Manufactured or designed a defective component portion of the finished product;
- Are in charge of industrial or other processes that contribute to a fundamental feature of the product;
- A product that has been fixed, refurbished or replaced;
- Put your company's name or a trademark on the goods;
- You supplied the goods with your own name on them, creating the appearance that you manufactured them;
- The product was imported into the European Union;
- The goods were supplied, but the maker could not be identified, or the manufacturer has gone out of business.
If you are only a wholesaler and reseller of the faulty product, you should not be liable for compensation unless you fail to identify the manufacturer(s), repairer, importer, etc. within a reasonable length of time if asked to do so.
When you are jointly and severally liable for the same injury, your liability is joint and several, and the claimant may sue any (or all) of the parties. Persona Finance [enquiries@personafinance.co.uk] will provide accounting and business advice.
