Does My Business Need Products Liability Insurance?

Does My Business Need Products Liability Insurance?

If your business involves either the manufacturing or provision of food stuffs, physical or medical products, then you will be at risk from legal liabilities due to injury or illnesses caused by malfunctions or defects in a product or products you provided.

Products Liability Insurance will provide protection against such instances, including design defects or failure to adequately warn consumers about the dangers of using or applying a product. Generally, products liability cover will be included alongside Public Liability Insurance as part of your business package cover.

Typical Areas of Products Liability Claims

Product Liability Insurance typically provides protection against claims in the following areas:

  • Manufacturing or production flaws that cause unreasonably unsafe defects in the product. For instance, there may be traces of dangerous chemicals in your product, which could be toxic to those using it.
  • Design defects that make the product unsafe for use by the public.
  • Failure to provide adequate defect warnings or instructions for using the product. These claims arise when products are not properly labelled or had warnings that were not explanatory enough to reduce consumer risks while using the product.

Depending on the specific circumstances of the claim, money may be awarded to the party that filed the claim for compensatory loss (including costs, economic damages and fees) or punitive damages (designed to deter the defendant from repeating the action that caused the damage).

On occasions, these claims can be so significant that the level of damages awarded can be large enough to put organisations out of business or cause long-term financial issues without the protection of adequate insurance protection.

My Business Doesn’t Manufacture – Why Do I Need Cover?

Even if your business does not physically manufacture a product, you may still be at risk of litigation. The actual manufacturer is not the only party liable for product flaws, defects and failures. Retailers and wholesalers could also be found liable if:

  1. Your Business name or brand is on the product
  2. You have repaired, altered, or refurbished a product
  3. The product is imported from outside the European Union
  4. The manufacturer cannot be clearly identified
  5. The manufacturer has gone out of business

How To Limit Products Liability Risk

The Health and Safety Executive (HSE) has worked hard to encourage businesses to improve Risk Management techniques.  However, an area often overlooked when building risk assessment programmes is product exposures.

Inputting the following techniques into your businesses to limit product liability claims:

  • Develop a quality control programme and distribute it to your employees. It should outline procedures for product safety, design, testing and inspection. It should also include information regarding traceability, guidance regarding customer complaints and a product recall programme.
  • Place batch or serial numbers on all products to ensure that they are traceable in case of a recall.
  • Keep records of all information about your products, including testing, product performance, component percentages and complaints.
  • Ask a solicitor to review warning labels, assembly and operating instructions, disclaimers and any other information distributed to consumers. If you need additional assistance, consult a product safety specialist.
  • Ask a solicitor to review contracts and indemnity agreements for use with your customers and subcontractors, this should be repeated on a regular basis to ensure they are fit for purpose.  Check that these contracts limit the liability you will assume for a quality product.  It is also worth consider obtaining certificates for liability insurance from your subcontractors.

FREE Business Insurance Review

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