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What is Product Liability Insurance?

Quote You Today product liability insurance , FAQ , indemnity

In short, product liability covers liability, or legal obligation, associated with parts or products that are sold.

In practical terms, this means if you make, distribute, supply or sell a part or product to someone and they then suffer bodily injury or property damage as a result of that part or product being faulty, you will be covered for a claim against your business.

This may seem a bit unfair if you didn’t actually manufacture the part, and your business is part of the supply chain between the manufacturer and the end customer, but there are quite sound reasons behind this.

For example, sometimes parts are modified or re-manufactured somewhere down the line, so in a case like that, it certainly makes sense that everyone in the chain is jointly liable for a faulty component or end product.

It is worth noting that suppliers who don’t change anything material, but re-label products are actively taking on board responsibility for this too.

There are also arguments for liability across the supply chain when a part or product does not undergo any later change or modification, for instance, when a manufacturer and/or supplier goes bust.

The customer then still has some recourse for compensation which they are entitled to, under the Consumer Protection Act, because as stated, all parties are jointly liable.

In reality, it’s not always clear whether each party would make an equal, or any contribution, as each party is likely to have its own insurer and this kind of policy also has the ‘right to recourse’ written in in many cases.

Right to recourse essentially means that an insurer will indemnify (or compensate) the injured party, and then claim that pay out back from the insurer of the next business further along the supply chain.

In this way, the manufacturer ultimately becomes liable when the claim reaches its own insurers.

In the meantime, the consumer will have avoided being involved in any of the legal wrangling that may arise between parties and would not have to wait for it all to come back to the manufacturer before receiving compensation.


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