Product liability insurance protects your business against claims arising from damage or injury caused to another business or person by the failure of the products you manufacture, supply or sell. This can include design, manufacturing or instructional defects.
It’s important to remember, that if you import products into Australia, for the purpose of insurance, you are deemed to be the manufacturer. As such, your product liability insurance has to be rated accordingly so it will respond in the event of a manufacturing / design fault.
The financial impact of a product liability claim (both defense costs and compensation payments) can be significant, so it’s important to have the right coverage in place for your business. We have provided a few claims examples below along with key tips to consider when reviewing your insurance.
Who: Importer and Wholesaler of Solar Systems
What happened: A solar inverter imported by the insured was faulty and caused a fire at a customers home. After investigation by the customer’s insurance company, it was found that the insured’s inverter was the cause of the fire. The customer’s insurance company brought legal action against the insured to recover the damages.
Outcome: The insured’s liability policy responded, paying for investigation costs to determine fault. It was found that the insured’s product was the cause of the fire and a claim was settled for $88,000.
Who: Manufacturer of natural skin care products
What happened: The ingredients printed on the label of a body cream were incorrect. A customer who used the product broke out in a severe allergic reaction causing skin damage.
Outcome: The insured’s liability policy responded, paying $8,000 in medical expenses.
What happened: A customer suffered food poisoning after eating at the insured’s restaurant. Medical tests show they had salmonella poisoning. The customer was a contractor and had to take 3 weeks off work while they recovered. During this period they were unable to earn an income.
Outcome: The insured’s liability insurer agreed to pay for 3 weeks lost income.
- Disclose all business activities. If your activities change during the year, advise your insurance broker. Undisclosed activities can have a significant impact on claims.
- Sales are a key factor in calculating premium. Make sure you disclose your correct sales volume, or claims payments may be effected. Every year at renewal, make sure you update your expected sales.
- For insurance purposes, if you import any products into Australia, you are deemed to be the manufacturer.
- If you engage sub-contractors, find out how your liability policy responds to work they perform under your direction and also if they are injured on site.
- Depending on your business activities, there may be special endorsements added to your insurance schedule. Make sure you read and understand these endorsements, as they do alter the cover offered by your policy.
- Read the exclusions detailed in your policy wording! A few exclusions worth mentioning are faulty workmanship, product recall and contractual liability.
To discuss product liability insurance in more detail, please call us on
1300 167 143, or