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Product Liability insurance* protects your businesses against claims by third parties relating to property damage or personal injury caused by your products. Product Liability insurance usually forms part of a Public Liability policy and the word ‘product’ will be a defined term in the policy wording.
A common policy definition of ‘Product’ includes anything that has been manufactured, constructed, erected, assembled, installed, grown, extracted, produced, processed, treated, altered, modified, repaired, serviced, bottled, labelled, handled, sold, supplied, re-supplied, distributed, imported or exported by you, or on your behalf.
Product Liability insurance is designed to assist you when your products cause a third party to sustain personal injury or property damage. Product Liability insurance is intended to cover any compensation payable to a third party, and your defence costs (these are the reasonable costs incurred while investigating and defending a covered claim including legal fees, experts fees and court costs).
Product Liability insurance is there to help you from the moment an allegation of negligence relating to your product is made. Of course, it is always important to check the limit of cover offered by your policy, as well as any exclusions or geographical limitations.
In Australia, if you manufacture or make products available to the public (i.e. sell or give away), you are responsible for ensuring those products are safe; comply with Australian Standards; and that they meet the statutory requirements set out in the Australian Consumer Law (ACL).
If the products you sell or make available have a defect that causes personal injury (which includes illness and even death) or property damage, a consumer or, in some cases, their family can seek compensation from the manufacturer or supplier. While your business may not physically manufacture the products, it may be considered to be the manufacturer if your business assembles, imports, uses its brand on the product or holds itself out to the public as the manufacturer.
For more information on your responsibilities as a manufacturer, please refer to the Australian Competition and Consumer Commission website.
Product Liability insurance is an important consideration for any business that supplies or distributes products in Australia. Even with the highest attention to safety, there is always the potential for something to go wrong.
Claims arising from personal injury or property damage as a result of a product defect can be expensive, and without the right Product Liability insurance you could find yourself in hot water. If you operate as a sole trader, you will potentially be exposed to personal liability for personal injury or property damage claims, meaning a Product Liability claim could seriously affect your personal assets.
A Product Liability claim could arise from:
Defective warnings, instructions or labeling of the product
For example, a specialist work machine is sold without adequate instructions for use, or a warning about the dangers if used incorrectly.