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Product Liability FAQ
1. What is Product Liability?
Product liability refers to the liability of any or all parties along the chain of manufacture and distribution of any product for damages caused by that product. This includes the manufacturer of component parts (at the top of the chain), an assembling manufacturer, the wholesaler, and the retail store owner (at the bottom of the chain).
2. What is Product Liability Insurance
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.
3. Who needs to buy Product Liability Insurance?
All parties engaged in the chain of manufacture or distribution of a product. Product Liability claims typically arises from real or alleged defects in design, manufacturing, labeling and packaging, and warnings and warranties. Other causes may arise from the storage, transportation or handling of your products. In fact, any link in the chain of commerce is exposed to this risk. So whether you are a manufacturer, a vendor, a supplier or an exporter, you need to get yourself covered against product liability risks.
4. What is Limits of Insurance?
Limits of Insurance is the maximum an insurer will pay regardless of number of insureds, claims made or suits brought, or persons or organizations making claims or bringing in suits during a policy period.
5. Hong long is the policy period for product liability insurance?
The policy period for product liability insurance is typically one year. The policy can be renewed upon expiring. Depending on the shelf life of a product, large US and European buyers often require suppliers to maintain valid product liability policies for up to five years after they cease to supply these products.
6. Why is the premium rate for products exported to the United States usually much higher than that of the rest of the world?
The United States is the most litigious country in the world. In some jurisdictions there, awards of up to millions of US dollars are a common occurrence. While some products liability cases can be won in court, most involve a lengthy and very costly legal process.
7. If I want to buy product liability insurance, what information do I need to provide to the insurer?
The information you need to provide includes, but not limited to:
1) company name, address and website (if any);
2) product description, annual sales projection, and countries these products are exported to;
3) sales turnovers for the past 5 years;
4) loss record, product recall record for the past five years;
5) product certificates and test reports;
6) insurance requirement(policy form, limit of liability, etc);
7) your expiring policy or insurance info if any.
8. Why do I need to provide accurate and complete information to the insurer?
Insurance abides by the Utmost Good Faith principle. It requires the insurer to honor their promise in the insurance contract; it also requires that the insured provide accurate and complete information. Any act of intentional misrepresentation would lead to coverage disputes down the road.
9. How do I select the right insurer for my product liability insurance?
When comparing quotes from different carriers, you need to evaluate these important factors, in addition to premium and rates:
1) Is the insurer financially solid; is it admitted by the country of your vendors;
2) does the insurer have the global presence and networks required by your export needs;
3) Is the insurer capable of providing professional services and claims expertise in countries where your products will be used;
4) Is the policy form court-tested and commonly accepted by the country of your vendors;
5) What are the terms and conditions, and exclusions?
Important Notes:
1. This article is to introduce basic knowledge of product liability insurance only. It should not be treated as advice. Should you require any advice on your insurance or coverage requirements, you should consult your professional insurance advisor.
2. This article is for your information and the description herein is a summary only. It does not include all terms, conditions and exclusions of the policies described. Please refer to the actual policy for complete details of coverage and exclusions.
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