Product Liability insurance* protects your businesses against claims by third parties relating to property damage or personal injury caused by your products
Product Liability commonly forms part of a Public Liability insurance policy*. A product is usually defined in the insurance policy wording, something which you should check as each policy will have its own unique definition.
A common 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 intended to cover 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).
Take the time to check the cover limits detailed in your policy and any exclusions and geographical limitations that may be included.
Am I liable for the products I manufacture or sell?
In Australia, if you manufacture or make products accessible to the public (i.e. sell or give away), you are legally responsible for making sure those products are safe; that they comply with product liability laws; and that they meet relevant mandatory standards set under the Australian Consumer Law (ACL). If you import goods you are deemed to be the manufacturer and by Australian law, you have the same legal responsibility as the actual manufacturer.
If the products you sell or make available have a safety defect that causes personal injury, illness, death or property damage, a consumer (or dependents of a person injured or killed) can seek compensation by taking you and/or the manufacturer to court.
Beware that even if you have not manufactured the products yourself and only assembled the goods, placed your own brand name on the goods, promoted yourself as the manufacturer to the public, or allowed an external party to promote your goods as having been manufactured by you, under the ACL you may be deemed as the manufacturer.
If your business interacts and exports within the online global marketplace it is important to check the geographical limits listed within your policy.
For more information on your responsibilities as a manufacturer, please refer to the Australian Competition and Consumer Commission website.
Do I need Product Liability Insurance?
Product Liability insurance is an important consideration for any business that supplies or distributes products in Australia. Even with the greatest 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:
- A fault in the manufacturing or production of a product
For example, the plastic casing of a power adapter is not put together tightly enough, electrical wires become exposed, causing electric shock.
- A defect in the design of the product
For example, clothing manufactured using dye that contains a hazardous chemical causing illness.
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.
*As with any insurance, cover is subject to the terms, conditions and exclusions contained in the policy wording. The information contained on this website is general only and should not be relied upon as advice.
Public Liability Insurance is a business name of BizCover Pty Ltd (ABN 68 127 707 975; AFSL 501769)