Product liability insurance: a basic definition

Product liability insurance indemnifies the insured against all sums which the insured becomes legally liable to pay in respect of accidental bodily injury or illness to third parties, and accidental loss of or damage to third party property, arising out of the use, misuse, consumption, or handling of insured products or goods.

Whether you are a manufacturer, a vendor, a supplier or an exporter, you are exposed to the risk of products liability claims. In fact, any link in the chain of commerce is exposed to this risk.

Products liability claims typically arise from real or alleged defects in design, manufacturing, labeling, warnings and warranties, and packaging. Other causes may arise from the storage, transportation or handling of your products.

You may believe that your products are flawless. But have you thought about misuse? In some jurisdictions even the deliberate misuse of a product can be a basis for liability claims.

Read more on product liability:

• Exporters: Managing Product-Liability Exposures, by Marc Breuil, Regional VP, AIG South East Asia and Greater China. (This article was first published in Asia Insurance Review's October 2005 issue.)
• US Product Liability, by Clausen Miller.

For more about product liability contact AIG.