Product Liability Insurance

What is Product Liability Insurance?

Definition

The Consumer Protection Act 1987 makes it a criminal offence to supply unsafe consumer goods. Any product you supply must be "fit for purpose."

If it isn't and someone suffers injury, illness, loss or damage as a result of using your product, then you are legally liable and could be sued for millions.

Anyone who is injured as a result of using a product supplied by you or a product using a component made by your business - even if they didn't buy it themselves - can take out a lawsuit against you, in some cases even up to 10 years after the product was sold.

Compensation For...

Under the Consumer Protection Act, an individual can sue for compensation for:

• Death
• Personal injury
• Private property (minimum £275)

There is no financial limit on a manufacturer's or producer's total liability.

What products are covered?

• Consumer goods (eg infant, baby and child products and toys)
• Goods used at a place of work (eg chemicals and machinery)
• Foodstuffs and processors of food stuffs (eg plants and vegetables, farm animals and dairy products and fish)
• Building materials (eg bricks, joists, insulation and tiles)
• Components of a product (eg wheels on a car)
• Raw materials (eg cotton, mineral water)

Who Is Most Liable

Who is most liable - the manufacturer, the importer or the retailer?

If you supply products to consumers, you must ensure the products are safe. The public has a right to expect this which is why, under law, everyone in the supply chain - manufacturers, distributors, suppliers and retailers - can theoretically all be held responsible.

By far the greatest responsibility for the safety of a product lies with the producers, namely:

• Manufacturers
• Importers
• Suppliers of own-brand goods
• Businesses servicing or customising the product

Distributors - wholesalers and shops - that supply the product are not normally held liable for injury or damage resulting from use of the product as long as the original producer can be identified.

What is product liability insurance?

If you produce, repair or sell goods, you could be held legally responsible for injury, illness, loss or damage resulting from a design defect even when you haven't been negligent.

Product liability insurance covers you against claims against you or your business for dangerous, defective or faulty product and goods made or sold by you up to a maximum amount each year.