Do I need Product Liability insurance?

If your business supplies products to consumers, you have a legal responsibility to ensure that they're safe – and you may be held responsible for any damage or injury that they cause.

While there's no legal requirement to be insured against this kind of liability, the consequences of being sued could be disastrous for your reputation, your finances and the future of your business.  So it should be apparent that, as a supplier of products, taking out the right insurance is a wise and prudent move.

 

What is it?

Product liability insurance is intended to help with the cost of compensating someone who is injured or suffers loss due to an unsafe product that your business has supplied.

It's not to be confused with public liability insurance, which is intended to help with the cost of compensating a member of the public who suffers loss or injury as a result of interacting with your business – such as the victim of an accident on your business's premises, or damage caused during a customer delivery.

 

Am I liable for damage caused by the products I supply?

Those most responsible for the safety of products include:

  • Manufacturers and designers.  Using unsafe manufacturing processes (such as using harmful chemicals) or including dangerous design flaws can leave you liable for the damage they cause.
  • Importers.  Different countries may have different safety regulations, and if you bring foreign products into the UK, you may be responsible for ensuring that they conform to UK safety standards.
  • Businesses that make modifications to products that affect their safety.  If you customise or service products, you need to ensure that you preserve the safety of those products.
  • Businesses that sell products using their own brand name.

 

If you're a wholesaler or retailer, you may not be liable for your unsafe goods, as long as you can identify the producer and have not altered or serviced the product.  But if you sell unsafe products which you know (or ought to know) are unsafe, you might face legal action.  That's why a number of retailers in the past have issued massive recalls upon discovering dangerous faults with their merchandise.

Implementing a system of thorough and diligent quality control for the products you supply might help to avoid producing unsafe products that lead to legal action.  And a stringent set of measures in place may also help to reduce your premiums.

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