Like a lot of businesses in Australia, you strive to create quality goods for your customers.
However, we all know there’s no such thing as a perfect and infallible product. Faults have the potential to cause injury and damage to your customers, which could cost you a substantial amount of money in legal fees.
Whether your business builds a product from scratch, is involved in its basic assembly or just sells it to customers, it could be liable for any incidents where the product causes harm, loss or damage to customers. Product liability insurance* can help minimise the legal setbacks your business may encounter.
What is product liability insurance?
Product liability insurance is designed to protect businesses in the case of their products causing injury or damage to customers. It covers the legal fees that may arise and is generally an important consideration for companies that are involved in providing products to the public including manufacturers, wholesalers and retailers.
These policies are generally part of a public liability insurance policy.
How does product liability insurance work?
Product liability insurance works as a safeguard for business owners since it can help cover various instances where a product could cause damage or harm. If a customer claims injury or loss caused by your business’s product, your product liability policy will step in to cover the cost of the claim.
For businesses, product liability insurance can cover various situations where a product can negatively impact customers. These can include:
- personal injury/illness (e. when customers are harmed as a result of your product). For example, when products malfunction and people are injured, or when food is contaminated and your customers fall ill.
- property damage. The result of a third party’s property being damaged by your product.
What doesn’t product liability insurance typically cover?
Like any insurance product, there are some cases where your business may not be covered. The following are some common exclusions in product liability insurance policies:
- blatant deception about your product before getting insurance. If you lie about elements of your product to your insurer, you’re likely in breach of your policy;
- undocumented changes in the design of your product. If you make significant changes to your product without notifying your insurance provider, your policy may be void;
- bad advice regarding the product given by you or your employees. This includes safe ways to use the product. If the advice pertains to misusing the product, you may not be covered for the consequent damages;
- products that produce or include asbestos. Asbestos is a hazardous chemical, so policies are unlikely to cover it; and
- costs associated with recalling your product. However, this may be offered by your provider as an optional extra instead.
Do I need product liability insurance?
You should never assume that your product, no matter where on the supply chain you sit, is infallible. Product liability insurance is a good idea to consider for every business that provides products for public consumption, from sole traders to manufacturers.
Product liability insurance also deals with more than a product breaking or malfunctioning. In 1998, the Australian Competition and Consumer Commission (ACCC) won in court against Glendale Chemical Products Pty Ltd, after it was determined that Glendale Caustic Soda wasn’t labelled correctly. The mislabelling ultimately led to injury. This case shows that it’s not always the most obvious mistake that can lead to damages.
With this in mind, it’s important to consider what products you make and whether product liability insurance is right for you.
Frequently asked questions
How to get product liability insurance
Whether you’re starting a new business or just reviewing its current cover, you can investigate product liability insurance by merely comparing your options.
Our comparison service is a great place to start. Just enter your profession and some details about your business to compare a range of policies and get a quote – all at no cost to you!
*As with any insurance, cover is subject to the terms, conditions and exclusions outlined in your policy document. The information provided on this webpage is general only and should not be relied upon as advice.
Meet our Business Insurance expert, Stephen Zeller
As our General Manager of Business Insurance, Stephen Zeller says product liability insurance is designed to protect businesses if their product causes injury or loss to customers. Stephen wants businesses to have the freedom to build and innovate new products with the added protection that product liability insurance provides.
With over 30 years’ experience in the financial services industry, including 27 years at the Bank of Queensland, Stephen is Compare the Market’s leading expert in business insurance. He’s also a long-time customer rights advocate and an allied member of the Australian and New Zealand Institute of Insurance and Finance (ANZIIF).