Liability insurance

Product liability insurance

In product liability insurance, a product is defined as any physical item that is sold or given away.

Products must be "fit for purpose", and under the Consumer Protection Act 1987 you are legally responsible for any damage or injury that a product you supply may cause.

Your responsibilities

If you supply a product and something goes wrong with it, claimants are likely to try to claim from you first, even if you did not manufacture the product.

The nature of risk, ie the viability of a claim and the premium, is affected by who the product is sold to, how and where it is used and any warnings or labels that are provided.

What the insurance covers

The product liability insurance that you buy covers you against any compensation awarded as a result of damage or injury caused by your product. For information on this issue, download a guide to the Consumer Protection Act 1987 from the DTI website (PDF).

Product liability covers you against unforeseen circumstances. If you simply make an inferior product, then you may not be able to make a claim. Bad workmanship is not covered either.

How much cover should you take out?

Most businesses have cover of between £0.5 million and £5 million, but the norm is £2 million.

In order to reduce your premiums you should put in place quality control measures. This not only ensures lower premiums, but also reduces the risk of compensation claims and the loss of your reputation in the marketplace.

Subjects covered in this guide

• Introduction
• How liability insurance works
• Employers' liability insurance
• Public liability insurance
• Product liability insurance
• Pollution risk insurance
• Property owners' liability insurance
• Professional indemnity insurance
• Directors' and officers' liability
• Seek specialist advice

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