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Most people in business have heard of public liability insurance, but what is product liability?
Virtually all public liability policies will include product liability as part of the cover, and in this guide we’ll take a closer look at what this cover is and how it can benefit your business.
Often public and product liability insurance is known as broadform liability, or more commonly simply as public liability.
What is Product Liability?
Product liability is very similar to public liability, in that both forms of cover protect you and your business in the event of property damage or personal injury being suffered by another person.
But where public liability is all about your actions or activities, product liability is all about the products you supply.
Although you may not manufacture or import the product, the fact that you are supplying it can see you dragged into a claim relating to damage or injury caused by the product.
Many business owners are a little puzzled as to why they need to be insured for something that isn’t really their responsibility, so we’ll take a look at an example to make it easier to understand.
An electrician installed a power point into a home, and a few days later the homeowner received an electric shock whilst using the power point.
Sadly the homeowner died as a result of the shock, and the victim’s family is now suing the electrician for a substantial sum of money.
Because the electrician has public and product liability in place his insurer is covering the legal costs.
Investigations into the death eventually found that the electrician had performed the installation correctly, however the power point he supplied was faulty and directly caused the electrocution.
Although the electrician was found to not be at fault, his insurance policy still covered all costs associated with the victim’s death.
This ensured that the electrician was not left out of pocket, and the victim’s family still received appropriate financial compensation for their loss.
Generally what would happen next is that the insurance company would seek to recover their costs from the manufacturer who was responsible for the faulty product, but by this stage it is no longer the electrician’s concern.
Does My Business Need It?
Any business that supplies products to clients should have product liability insurance in place.
It’s easy to think that only retailers and product providers would need this form of cover, but as we can see from the example above with the electrician, many different business types can benefit.
Ultimately it doesn’t really matter whether or not your business needs product liability, as virtually all public liability policies include it and there is no option to remove it.
What is the Cost?
Product liability is a no-cost option on the vast majority of public liability policies.
Some policies will list a separate cost for the product liability in the premium breakdown, however since there is no option to remove the product liability there is little point in worrying about it.
For more information please contact us or speak with your insurance broker.