What does product liability insurance cover?

Understanding product liability

Product liability insurance is designed to protect your business against claims made by a member of the public, in relation to injury or damage to their property due to an incident at your business or as a result of products that you make, supply or sell.

A 'member of the public', by this definition, is anyone not employed by your business. When it comes to product liability claims, this is almost always the customer, but it could also be a courier, supplier, or client.

The type of claim you're likely to experience will vary depending on the nature of your business, but here are a few examples of product liability claims that a small businesses may experience.

Examples of product liability claims

1

Contaminated good

At your corner shop, you sell fresh packaged chicken to a customer who then develops salmonella, causing them to become seriously unwell. You may be liable for compensation costs due to the customer if they seek to make a claim.

2

Electrical fault

A TV sold by your online electrical store has loose, uncovered wiring due to a manufacturing fault and a customer is electrocuted, leaving them in hospital. Your business may be liable for the compensation costs, despite not manufacturing the product yourself.

3

Fire damage

A portable home heater that your company builds malfunctions and causes a small fire in a customer’s house. Even if no one is injured, you may be liable to pay compensation costs to the customer to repair the damage caused to their home by the malfunctioning product

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