Products liability insurance responds to your legal liability for injury or property damage caused by goods after they have left your hands. That includes goods you sell, supply, manufacture, import, hire out, repair or install. For a small or mid-sized business it is usually written in the same policy as public liability insurance, but it is a separate section with its own limit and its own questions. This guide explains what the products section is for, why importers need to pay close attention, and what it does not do.
What Products Liability Insurance Responds To
The public liability section responds to injury and damage arising from your business activities: a customer tripping in your shop, or a contractor damaging a client’s floor. The products section responds when the thing that causes the harm is a product you dealt with, and the harm happens after it has left your premises or your control.
- A heater you sold catches fire in a customer’s home.
- A ladder you imported collapses under the user.
- A tap you supplied and installed fails and floods a kitchen after the job is finished.
- A trailer you repaired loses a wheel on the highway.
- Food you prepared makes customers ill.
“Products” is usually defined broadly in these wordings and typically extends to packaging and containers. Inadequate warnings and instructions can also be the basis of a products claim in their own right, which is why labels matter as much as the goods.
How the Limit Works
Combined public and products policies typically apply the public liability limit to any one occurrence, and the products liability limit in the aggregate: the total the policy will pay for all products claims during the period of insurance.
An aggregate limit can be used up. A single serious incident, or a batch fault that injures several people, can consume it for the rest of the year. Contracts and supply agreements commonly ask for a specific products limit, so check the figure you are asked for against the aggregate on your schedule. Our article on choosing public liability limits covers how to think about the number.
Why Importers Need to Pay Close Attention
When a product made overseas injures someone in Australia, the injured person looks for someone here to hold responsible. Australian consumer law can treat an importer as the manufacturer in some circumstances, including where the overseas maker has no place of business in Australia. That means an importer can carry a manufacturer’s exposure without any control over how the goods were made. Get legal advice on your own position.
Underwriters ask importers specific questions:
- What the products are, where they are made and who makes them.
- Whether the goods are tested against the relevant Australian standards, and who holds the reports.
- Whether the overseas supplier carries its own liability cover and will name you on it.
- Whether your contract with the supplier includes an indemnity, and whether it could be enforced in practice.
- Whether any goods are exported, particularly to North America, which commonly needs specific declaration and may be excluded.
- Your import turnover, separate from goods bought locally.
Answer these fully. Leaving imported lines off the proposal can put a products claim at risk when you need it.
Online Sellers and Private Label Goods
Selling through your own website or an online marketplace does not change the basic exposure, but it can change the facts an underwriter needs. Goods shipped to overseas buyers raise the same territory and jurisdiction questions as exports. Marketplaces and larger retailers commonly ask sellers for evidence of products liability at a stated limit. And putting your own brand on goods made by someone else can make you look like the manufacturer to the buyer, even though you never touched the production line. Tell your broker about private label lines, as well as every channel you sell through.
What Products Liability Does Not Do
- Recalls. The cost of withdrawing, recalling, inspecting, repairing or replacing products is typically excluded. Product recall cover is a separate specialist policy.
- The product itself. Damage to the faulty product, and the cost of replacing it, is typically excluded. The policy is aimed at harm the product causes to people and to other property.
- Failure to perform. Where a product simply does not work as promised, without causing injury or damage, the loss is usually outside the policy.
- Advice and design. Liability arising from specifications, formulas or advice you provide can move into professional indemnity territory. Our comparison of public liability vs professional indemnity explains where the line falls.
- Contractual liability you accept beyond what the law would impose anyway, unless the insurer agrees to it.
- Specialist products such as aircraft parts, medical devices, pharmaceuticals and some chemicals, which usually need specialist markets.
How It Sits with Public Liability
Because the two sections share one policy, they share one description of your business. That occupation description decides which activities the insurer has agreed to insure, for both sections. A business described as a retailer that also imports, assembles or installs has told the insurer only part of the story. Our article on why the occupation matters on public and products liability explains how that plays out at claim time.
Installers sit across both sections. While you are on site, damage you cause is generally a public liability question. Once the job is complete and you have left, damage caused by what you installed, or by the workmanship, can fall into the products section. The cost of redoing the faulty work itself is typically excluded under both.
Turnover matters as well. Underwriters rate products exposure on sales, so declare turnover by activity where the proposal asks for it: retail, wholesale, manufacturing, import and installation.
Records That Help Defend a Claim
- Supplier details, batch numbers and dates of supply for each product line.
- Test reports and compliance certificates.
- Copies of labels, warnings and instructions as supplied.
- Supplier agreements, including indemnities and the supplier’s certificate of currency.
- Complaint and incident logs, with what you did about each one.
Retailers and distributors you supply commonly ask for your certificate of currency as well. See what a certificate of currency is and what it shows.
Common Questions
I only resell goods I buy locally. Do I need products liability?
Resellers can still be pursued by an injured customer, even where the manufacturer ultimately bears the loss. Buying locally usually presents better to an underwriter than importing, but the exposure is not zero.
Does products liability pay for a recall?
Typically not. Recall costs are a separate specialist cover.
Can products liability be arranged on its own?
It can, but for a small business it is usually arranged with public liability in one policy, often within a business insurance package.
Talk It Through
Request a quote or call 1300 983 940 and we will match your public and products liability to what you actually make, import, sell and install.
General advice only. This article does not take your objectives, financial situation or needs into account. Consider the relevant PDS and Target Market Determination before deciding on a policy.