Liability Insurance
Product Liability Insurance
Product Liability Insurance protects businesses from financial and legal consequences arising from claims that their products caused bodily injury, property damage, or financial loss to consumers.
This insurance is crucial for manufacturers, wholesalers, retailers, distributors, and importers who sell physical products, as it covers legal costs, settlements, and compensation claims if a defective or unsafe product harms a customer.
Why is Product Liability Insurance Essential?
- Protects Against Costly Lawsuits
- Required by Retailers & Distributors
- Safeguards Business Reputation & Finances
- Covers Product Defects & Malfunctions
- Essential for Various Industries
Important Things You Should Note
- It is Different from General Liability Insurance – While Commercial General Liability (CGL) covers general business risks, Product Liability specifically covers damages due to defective products.
- Covers Various Product Defects – Includes manufacturing defects, design flaws, and failure to warn consumers properly.
- Applicable to All Supply Chain Participants – Manufacturers, retailers, and distributors can be held liable, even if they did not manufacture the product.
- Legal Defense Costs are Covered – Even if a claim is baseless, legal expenses can be high; Product Liability Insurance covers such costs.
- Strict Liability Applies – Even if a business did not act negligently, it can still be held liable under strict product liability laws.
What is Covered & What is Not Covered?
What is Covered?
- Bodily Injury – If a defective product causes injury, illness, or harm to a consumer.
- Property Damage – If a product damages another person’s property (e.g., a faulty appliance causes a fire).
- Manufacturing Defects – Issues in the production process that make the product unsafe.
- Design Defects – Flaws in the product design making it hazardous for users.
- Failure to Warn or Labeling Issues – Inadequate instructions, missing safety warnings, or misleading claims that result in harm.
- Legal Expenses & Compensation Costs – Covers attorney fees, court costs, settlements, and damages awarded to the injured party.
What is Not Covered (Exclusions)?
- Intentional Negligence or Fraud – Deliberate misrepresentation of product safety is not covered.
- Product Recall Costs – Separate Product Recall Insurance is needed for recall-related expenses.
- Warranties & Guarantees – Claims related to a product not performing as expected (without causing harm) are excluded.
- Professional Errors – Issues arising from advice or services fall under Professional Indemnity Insurance.
- Employee Injuries – Injuries to employees due to defective equipment are covered under Workers’ Compensation Insurance.
Frequently Asked Questions (FAQs)
Who needs Product Liability Insurance?
Businesses involved in manufacturing, distributing, importing, retailing, or selling products should have this insurance.
Does this insurance cover product recalls?
No, standard Product Liability Insurance does not cover recall expenses—Product Recall Insurance is needed for that.
What types of defects are covered?
It covers manufacturing defects, design defects, and inadequate warnings or instructions that lead to harm.
Can a retailer be sued for a defective product even if they didn’t manufacture it?
Yes, retailers and distributors can be held liable under strict product liability laws, even if they only sold the product.
How much does Product Liability Insurance cost?
The cost depends on factors like industry, product type, sales volume, and past claims history. High-risk industries (e.g., pharmaceuticals, electronics) have higher premiums.
