Companies and individuals around the world deal in goods and sell or give products to people. It could happen that by bad luck an accident could happen through defective products people consume and you may now be faced with proceedings against yourself. A standard product liability insurance covers legal liability for bodily injury or property damage, happening during the period of insurance, which arises out of goods or products manufactured, constructed, altered, repaired, serviced, treated, sold, supplied or distributed by the insured.
The injury or damage sustained must be accidental; the cover is only intended to cover unexpected events. If the word accidental is not used when specifying the policy cover, there is usually an exclusion for injury or damage which results from a deliberate act or omission of the insured.
The injury or damage must have been caused in connection with the trade or business stated in the policy wording. However, it is usual to extend cover to include any ancillary activities of the insured; e.g. first-aid facilities, canteens, private fire brigade and ambulance services and any private work carried out for any director, partner or employee of the company.
The cover may extend to include;
- The claimant’s costs and expenses associated with a claim
- The insured’s legal costs. Even if the business was not the cause of alleged injury or damage, the costs and expenses incurred in taking legal advice and defending an action in court can be substantial
- Legal costs and expenses in defending prosecutions under relevant legislation.
Other features of products liability insurance cover are:
- A yearly aggregate limit of indemnity applies,
- Consequential losses flowing directly from accidents resulting in injury to persons or damage to their property are covered. For example, if a faulty tyre causes a customer’s car to run into a wall, the insured’s products liability policy will cover the cost of repairs to the vehicle. If the customer needs to hire another car whilst their own is being repaired, the insured’s products liability policy will also cover the hire costs
- The injury or damage must occur during the period of insurance, not necessarily the supply of goods or services.