Products Liability – Cover against Product based Claims
As consumers we encounter “products” every moment of our lives - Products that range in a multitude of different niche industries specialising in providing the best products they can sell to us.
How many times have you received a faulty product that you have had to possibly return and refund? The chances are likely, that you, or someone you may know, may have even been hurt by faulty goods/products.
And if this is the case, it is very likely that some of those people you know of have even filed claims in serious cases against the manufacturers and/or distributors of these products in search of compensation against injury caused.
This is where Products Liability Insurance comes into play. It is a type of insurance that offers protection against “unintended bodily injury” and “property damage” resulting out of any material, product, and laboratory apparatus used for research.
Therefore, this kind of liability cover protects against claims where you have designed, developed, manufacture or sold a potentially faulty product that has caused injury or damage to the consumer or their property when attempting to use the said product.
In this article, we will explore:
- What Products Liability means
- Where do claims occur
- Different types of basic claims
- The different types of damages that turn into claims
- Responsibility during a Products Liability Claim (Who is deemed Liable?)
If you are looking for advice around/a policy based in Products Liability, we recommend you contact an Insurance Broker to further discuss what kind of liability cover you are in need of.
When Products go bad
As you can imagine there are 100s of different businesses that may need cover for products being sold, all from different industries.
For example a pharmaceutical and car manufacturer company would both need liability cover for the products they are producing and selling, as they of are high risk of receiving claims, despite being to polar opposite industry focuses.
These claims are normally made where the consumer of the product has received some sort of injury or property damage as a result of the product being faulty or incorrectly produced.
Sometimes this may be down to the consumers on negligence in using a perfectly safe product that has taken every precaution to prevent accidents, however even in these cases claims may be made by the consumer in an attempt to receive compensation for bodily injury or damages that have occurred.
In the event that this happen, the details of the claim and the court in question, will conclude whether or not the claimant was negligent or not, and determine who was liable. Should those responsible for the product be deemed liable and not the consumer, product liability insurance will cover the costs agreed upon between the insured and the insurance provider.
It’s key to remember – when these products go bad, claims are made. This can occur where:
- Injury resulted from direct use of the product
- Product caused direct (immediate or other time) damage or injury
- Product was deemed “defective”
- Product was incorrectly labelled regarding contents, intended use, ingredients, parts or instructions
When a claim is made, the claim can be made against multiple people with different roles within producing the product in question.
This can include the manufacturer of component parts, assembling manufacturer, and the wholesale and the retail store owners selling the product for example. This means a manufacturer or seller of a product deemed defective can be held liable for injuries arisen from use of the product.
Claims can arise from individuals who directly bought and used the product, or individuals to whom the product was lent by the original owner.
Who is liable when a claim is made?
If a claim is made a number of individuals can be held accountable:
- The Manufacturer
- The Seller
- Anyone who directly handled the product before consumer purchase that may be deemed directly responsible for harm/injury/damages caused.
It is possible for more than one individual or group to be involved in a claim if they were involved with the manufacturing process. In the court of law, if evidence is found that proves more than one group/individuals are responsible via manufacturing the product they will be held legally responsible together against the initial claim(s) made.
In some cases, the individual who has made the claim may be deemed responsible (and therefore the claim will be rejected) due to the fact that the injury/damages were intentionally caused or caused via their own negligence.
Why would the manufacturer/seller be deemed liable and not the consumer who owns the product?
This is an argument that many people have as manufacturers – in which the product is no longer in their hands and therefore they renounce all responsibility of the product after selling. This of course is not reality.
While products are often thought of as personal property, the laws behind these products has changed drastically in definition, now including a variety of different products such as gas; pets; real estate; writings and more.
As a manufacturer you have an intended result in mind when making your product. For example, if you make cars your intent is probably to make a car that is safe to drive. If you are making pharmaceutical drugs, your intention may be to relieve symptoms of a specific illness/aliment.
Therefore if you make these products with a specific intent, package them with intent, label them with that same specific intent, but this intent does not match the effect of the product when used (therefore resulting in bodily harm or damages) the consumer is not responsible for the injury/damage caused, but the manufacturer/seller.
The same occurs with the seller – where the seller has intent to sell a specific non-harmful safe product, but harm occurs when the product is used.
What if I am not responsible for the claim made against me?
Should there be no evidence found that the product was designed, developed, manufactured, packaged, labelled or sold in a manner that could have caused the injuries / damages occurred, you would not be deemed liable for the claim and therefore the claimant will not be rewarded.
The claim therefore may have been made because:
- The consumer was negligent in use of the product and therefore their negligence directly caused their injury/property damages.
- The consumer purposefully failed a false claim against the company/manufacturer/seller of the product fully aware the product was not directly responsible for any damages/injuries reported.
What type of damages turn into claims?
- Medical Bills – If use of the product results in injury that requires medical treatment and the injured party is required to pay bills in return for such treatment, the hurt party may make a decision to require compensation covering finances lost to covering the medical bills.
- Lost Wages – Medical treatment may be free for most people in the UK as the NHS is available for those not in private care, but if the injury is substantial enough the hurt party may lose out on being able to go to work. In some cases this can lead to loss of wage/wage reduction, making it difficult for the hurt party to financially support themselves. Therefore the hurt/injured party may request compensation costs to cover lost wage.
- Property Damage – If use of the product has resulted in property damage, cost to repair damages may be substantial and even unaffordable for the hurt party. Therefore claims may be made against the product manufacturer/seller to cover all costs occurred to fix said damages.
- “Pain and Suffering” endured – Damages/Injuries occurred may take a great toll on the hurt/injured party, causing “pain and suffering” in the long term. While this may not have an exact financial number attached to it, it’s emotional and possibly physical effects will run deep. Therefore the claimant may legally request a financial amount that they deem equal in weight to the “pain and suffering” endured as a result of using the defect product in question.
- Stress & Impact on marital relationship – In some cases, stress has on marital relationships have even occurred via short term and/or long term use of a defect product. If the claimant feels this is the case, they may request compensation in return.
- Punitive Damages – “Punitive damages” are where damages occurred exceed simple compensation due to their effect on the claimant. If the claimant is requesting compensation for punitive damages, this means the defect products property or physical/bodily damage was excessive.
Liability Insurance – Protection against Product related Claims
Sometimes despite our efforts to create a wonderful product with perfect use and effect (in line with the initial intended use of the product) claims can still find their way back to us.
Product Liability Insurance helps us better protect against such claims, by covering unexpected court and compensation costs (if rewarded) to the claimant.
Whether the claim you receive is for bodily injury, property or punitive damages (and in some extreme cases, all three) the cost of a claim can be life altering and enough to put a massive financial dent in your business.
We offer contractual liability insurance – ensuring full cover protection against claims resulting from use of a defect product.
As the manufacturer / seller of a product it is your duty and responsibility to ensure a product safe to use regarding its intent and purpose.
It is also your responsibility to ensure you are protected against claims, and when faced against them, handle them efficiently in your favour.
Without product liability insurance, you remain vulnerable and exposed to all potential claims made against you and will be legally required to pay out of your own pocket in full for any court costs and compensation costs rewarded to claimant regardless of whether or not you are capable of covering the claim costs directly.
To ensure full protection we recommend you speak to an insurance broker about the various options available to you under a product liability policy.