Product Liability insurance? We have you covered.
This week on the exchange, we want to discuss insurance and more particularly, product liability insurance (PLI). It’s a word many of us dread – the long phone calls, making claims and having claims made against us, are all things we could do without but unfortunately, that’s life. Without insurance, we would not be protected.
During the pandemic, we have seen a surge of individuals turning their hands to making leads and collars as a way of bringing in extra cash to their household. Although it is wonderful to see so many people engaging with leatherwork and crafts, this does, however, raise questions. Are the products I am making safe for distribution? If my lead breaks on a dog, and the dog is hit by a car, is it my fault? At this point, lines of responsibility can feel blurred and it is perhaps at this point, the importance of product liability insurance is amplified.
Although product liability insurance is not a legal requirement, we as businesses, have a duty of care towards our customers and the Consumer Protection Act states you must ensure the goods you supply are safe.
We spoke with PLI expert Paul Winterbottom from Gallagher Insurance brokers to offer his guidance on the matter.
Why is product liability cover recommended?
If a product injures someone or damages something, the principle responsibility will sit with the manufacturer. However, even if you do not manufacture the products you sell, there could still be circumstances in which you could be held responsible. One example would be if you brand products with the name of your business, or if the manufacturer cannot be traced, is outside the EU or has gone out of business.
What does product liability insurance cover?
Product liability insurance covers the cost of compensating anyone who is injured by or has their property damaged by a faulty product that your business designs, manufactures or supplies.
How much product liability insurance do I need?
Ultimately it is down to you to decide what level of cover you need. The decision should be based on the type of products you make &/or sell and the potential size of any compensation claims in the event of injury or damage. Typically, insurers offer a basic minimum of £1 million with the ability to increase this up to as much as £10 million. The cover would usually include both public liability and product liability cover as a package. Due to the increasing amount of litigation and the rising costs of claims many Insurers now offer £5 million as a standard limit. Compensation claims can be very high particularly if they include lost income and medical costs if someone has been injured.
You may also need to check any specific client contracts to see if a particular level of product or public liability insurance is requested.
Can you give an indication on how much product liability insurance costs?
In terms of what we can access the minimum premium levels are around £250 for £1m cover. Premiums can start from say £150 for £1m but the advice is always to try the online insurer market.