Is Product Liability Insurance a Legal Requirement?
Is Product Liability Insurance a Legal Requirement? Product liability insurance is a type of commercial general liability insurance that protects manufacturers, wholesalers and retailers from claims and lawsuits arising from injuries caused by malfunctioning products. Product liability can be defined as “a manufacturer’s responsibility to pay damages when the risks associated with its product go wrong”.
It operates on what is termed strict or absolute liability, meaning that the defendant has to prove it was not negligent in manufacturing the product in order not to be found liable for injury caused by it.
Is Product Liability Insurance a Legal Requirement? Does Law Require Product Liability Insurance?
If you own a business, you have probably asked yourself: ‘Is Product Liability Insurance a Legal Requirement?’ There is no requirement for any goods or services to be insured against product liability in the UK. However, should you be found liable for injury caused by your defective product and the victim sues you, the insurance must cover damages awarded to the injured party. If you don’t have insurance, your business assets may be seized.
What does Product Liability Insurance Cover?
The product liability insurance will cover legal fees and any compensation awarded to an injured person and the company’s costs of defending any claims against it. They can also include cover for prosecution or civil proceedings where death or severe injury results from using the product and help recover losses if the court finds them liable.
Another benefit of business insurance is that if one part of your business is claiming another part of your business, you may still be covered by product liability insurance. This can be useful when you are delivering a new product to production or involved in a warranty claim because of a recall of an existing product.
One way in which businesses may find themselves liable for injuries is under the doctrine of proximate cause. This is where it is held that a person has no duty to protect another person from harm unless his conduct causes it as part of his occupation. To solve the issue of negligence in the supply of a product and release any liability, many insurance companies pay for “Negligence Protection”.
This means that, should it become apparent that their product is defective and that the manufacturer has made a mistake, they have an obligation to remedy any issues as soon as possible.
In the case of ‘willful misconduct, a person can be held liable for injury caused if they knew that the product was defective but intentionally chose to disregard this. Manufacturers should always consider whether or not the product is reasonably fit for purpose and whether the user is instructed on the correct use. If a manufacturer does this, they are likely to escape any legal action as there would be no liability for negligence.
The main aim of Product Liability insurance is to protect your business from financial loss and potential personal injury. If you are found liable, you will have paid out compensation funds from any personal assets or business funds that would have been used to pay damages owing to an injured party.
What is A Product Liability Claim?
A product liability claim is an insurance claim made against a company for an injury that people have legitimately suffered due to their goods or services. A claim for damages can be made for anything from serious to minor injuries. It may also include loss of earnings and medical expenses. A product liability claim is often made by an injured customer who has suffered injury from using the product in question.
In the UK, there are strict procedures to force a manufacturer to recall their product if it poses any risk or danger to people. This is done to prevent any harm that may occur to individuals as a result of using or possessing the product. These recalls can cover all types of products such as food, medicines and even car parts.
Protecting Against Product Liability
If your business is likely to be involved in any Product Liability claim, you need to take out an insurance policy. This will protect you and your business against the financial risks of product liability claims. It is also important to remember that claims can be made against all parties in the supply chain, even if they have no direct involvement in creating or selling the faulty product.
In many cases, the product liability insurance coverage covers legal fees, compensation payments and medical costs that the injured party may incur. When a customer suffers an injury from using your products, you need to remain truthful about this.
Is Product Liability Insurance a Legal Requirement? To Conclude
It is important to remember that health and safety breaches can result in fines of up to £20 million and jail sentences if convicted. To maintain a good relationship with your customer, you should apologise without being defensive or admit any breach of duty on your part.
Find out more about the importance of insurance here.
Other useful links about Business Insurance:
Project Manager Insurance
Property Manager Insurance
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