Product Liability Insurance Policy - Product Recall Insurance

Product Liability Insurance

A business is involved in manufacturing, selling or supplying various products to their customers. This may be as small as a component for a vehicle or a shop selling toys for kids or a restaurant selling food.

Consider the recent famous case of Lead being found in Maggi. The National Consumer Disputes Redressal Commission initiated legal action against Nestle (producer of Maggi) as the lead content was found to be more than the permitted quantity. Such cases are all too common.

Though as a business owner you take utmost care of your customers, sometimes accidents happen which may cause injuries to customers and thus making you liable for your products.

This may result in customers suing the Business. Such cases may be expensive to defend and an adverse judgment may result in causing substantial financial damage to the business apart from the loss of reputation.

A Comprehensive Product Liability Insurance Policy will be immensely helpful in such a case.

What is a Product Liability Insurance Policy?

A Product Liability Insurance is a type of Insurance Policy which reimburses the Insured Person for the Defence Costs and Compensatory Damages that the Insured becomes legally liable to pay on account of the Bodily Injury and Property Damage caused by an Insured Company’s faulty products.

Commonly, a consumer of the company may sue the Insured for compensation if he/she suffers a bodily injury or illness because of consuming the company’s products. Alternatively, if using the company’s products causes Property Damage, even then the consumer might sue the Company.

A Product Liability Insurance Policy pays the legal expenses and compensatory damages awarded by the court in such cases.

What does a Product Liability Insurance Policy Cover?

Usually, Product Liability Insurance Policy Claims arise in the following situations:

Manufacturing Defects: Manufacturing Defects are a common source of Product Liability Insurance Claims. In such cases, there is usually a defect in manufacturing a particular batch of products which results in Product Liability Insurance Claims.
Design Defects: Product Liability Insurance Claims which arise out of Design Defects allege that the Product’s inherent design was incorrect from the outset. Design Defect Claims are different from Manufacturing Defect Claims in the sense that Manufacturing Defect Claims allege that there was an error in manufacturing a particular batch of products. As a result, the particular batch of product is defective. However, Product Liability Insurance Claims alleging Design Defects arise because the entire product (and not a particular batch of products) is defective as there was an error at the design stage itself.
Inadequate Instructions/Warning or Labeling Defects: Another type of Product Liability Insurance Claims usually arises out of a warning or labeling defect. In such cases, the consumer is supposed to be warned about the inherent danger of consuming the product through the use of labels with instructions. However, the failure to warn consumers might give rise to product liability insurance claims.

Usually, manufacturers get sued over Manufacturing Defects or Design Defects while retailers and distributors get sued over Warning or Labeling Defects.

Who should purchase a Product Liability Insurance Policy?

Any business which is involved in manufacturing, designing, selling or supplying products should buy a Product Liability Insurance Policy for itself.

If a company’s defective products causes a bodily injury or property damage to the customer, the customer may sue the company for damages and a Product Liability Insurance Policy will provide cover for Legal Expenses and Compensatory Damages awarded by the courts in such a case.

The business may just be supplying a small component to the final product but it could still be held liable for damages if it results in injury.

Usually, automobile manufacturers, auto component manufacturers, businesses involved in manufacturing food products and pharmaceutical products, restaurants and retailers should purchase a Product Liability Insurance Policy as these businesses are at a higher risk of getting sued.

How much does a Product Liability Insurance Policy Cost?

The Cost of a Product Liability Insurance Policy depends on the following factors:

Limit of Indemnity (Sum Insured Required)
Coverages Required (Global Cover, Retroactive Date etc)
Firm Revenues over the last 3 years
Industry to which the Company belongs
Prior Claims Experience

It is advisable to discuss this with product liability insurance agents to get a better idea.

How much does a Product Liability Insurance Policy Cost?

What are the Exclusions in Product Liability Insurance?

A Product Liability Insurance does not cover the following:

Exclusions in a Product Liability Insurance Policy

Costs Incurred in the Repairing or Replacement of Defective Product	Costs Incurred in Recall of Faulty Product
Fines, Penalties or Exemplary Damages are Excluded	Claims arising out of Deliberate or Willful Non-Compliance of any Statutory Provisions
Claims arising out of Contractual Liability

Product Recall Insurance

There are instances when the Insured Party realises that the product it has supplied or sold in the market is faulty or defective and poses an imminent danger of Bodily Injury or Property Damage.

The Insured Party has a Duty of Care and Responsibility to withdraw the product from the market even though the Faulty Product has not yet caused any Bodily Injury or Property Damage.

Recalling the product may save the company from bigger future liabilities when the product may cause Bodily Injury or Damage to the user or customer.

However, recalling the product from the market also entails significant expenses which can be insured with a Product Recall Insurance.

In the recent times, the Car Industry has witnessed multiple recalls in India. Product Recall Insurance is normally purchased by the Pharmaceutical, Food, Consumer Products and Automotive Industries.

What are the coverages under a Product Recall Insurance?

A Product Recall Insurance typically provides 2 coverages:

Coverage A: Product Recall Expense
Coverage B: Product Recall Expense Liability

What is the Product Recall Expense Coverage in a Product Recall Policy?

The Product Recall Expense cover reimburses the Insured Party for the expense incurred in recalling a Product arising out of a covered incident.

Product Recall Expense typically include expenses incurred for the Recall, Recovery of Possession/Control or Disposal of Product from a distributor or user of the product as the consumption or use of product poses actual and imminent danger of Bodily Injury or Property Damage.

Product Recall Expenses covered by a Product Recall Insurance Policy also include the following:

Cost of Communication to notify product users of a covered incident
Cost of Shipping the Product from purchaser or distributor to the Insured’s Designated Place
Disposal Cost that are required to be incurred to avoid Bodily Injury or Property Damage
Expense to rent additional warehouse or storage space

What is the Product Recall Expense Liability Coverage in a Product Recall Policy?

The Product Recall Expense Liability cover reimburses the Insured Party for the Defence Costs and Compensatory Damages that the Insured Party becomes legally obligated to pay arising out of a covered incident.

What is the Product Recall Expense Liability Coverage in a Product Recall Policy?

The Product Recall Insurance Policy normally excludes the following:

Exclusions in a Product Recall Insurance

Cost to Repair, Recondition or Decontaminate the Recalled Products	Intentional Act or Omission by the Insured which results in a Product Recall
Contractual Liabilities are not Payable	Fines or Penalties, Punitive or Exemplary Damages are excluded
Product Recall Expenses arising out of Deliberate Contamination or Tampering or Adulteration of Product	Product Recall Expenses arising solely out of intervention of Governmental or Public Authority

Retroactive Date Cover

Cover for Defence Costs and Compensatory Damages for Product Liability & Product Recall

Coverage for Product Recall Expenses

Claims Assistance

Get a FREE 1 Hour Consultation with our Product Liability Insurance Agents for your Product Liability and Product Recall Insurance Policy

If you are in the business of designing, manufacturing or exporting products, Product Liability and Product Recall Insurance are of paramount importance to safeguard your business. Qian has partnerships with the top Insurance Companies to cater to the clients for their Product Liability and Product Recall Insurance requirements and can assist you with comprehensive covers at competitive premiums

If you wish to purchase Product Liability and Product Recall Insurance for your company, you can avail a FREE 1 Hour Consultation with the experts at Qian. We would be delighted to help you out. Feel free to reach out to us at support@qian.co.in or 022-22044989 or fill this Contact Form. We will respond within 24 hours, guaranteed.

Get a FREE 1 Hour Consultation with our Product Liability Insurance Agents for your Product Liability and Product Recall Insurance Policy

FAQS

Do I need Product Liability Insurance?+

If you have a business that manufactures, sells or supplies products to products to customers, the business might be liable for the faulty products or components and hence you need a Product Liability Insurance to protect yourself.

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