Public Liability
If members of the public or customers come to your premises or you go to theirs, you should think about taking out public liability insurance.
What the insurance covers
This type of insurance covers any awards of damages given to a member of the public because of an injury or damage to their property caused by you or your business. It also covers any related legal fees, costs and expenses as well as costs of hospital treatment (including ambulance costs) that the NHS may claim from you.
Premiums depend on the type of business you run, your turnover and the number of employees you have.
There are many conditions, exclusions and warranties that can be applied to public liability policies. It is important therefore, that you discuss with Claim Insurance any that are applicable to your policy.
If you work from home, and customers or members of the public visit you there, you may also want to think about taking out public liability insurance.
Products Liability
In product liability insurance (PLI) terms, a product is any physical item that is sold or given away.
Products must be “fit for purpose”. Under the Consumer Protection Act 1987, you’re legally responsible for any damage or injury that a product you supply may cause.
Your responsibilities:
If you supply a faulty product, claimants may try to claim from you first, even if you did not manufacture it. You’ll be liable for compensation claims if:
- Your business’ name is on the product – ie the manufacturer made it for your brand
- Your business repairs, refurbishes or changes it
- You imported it from outside the European Union
- You cannot clearly identify the manufacturer
- The manufacturer has gone out of business
Otherwise, the manufacturer is liable – or the processor, where the product involves parts from multiple manufacturers. However, you must also:
- Show that the products were faulty when supplied to you
- Show that you gave consumers adequate safety instructions and warnings about misuseshow that you included terms for return of faulty goods to the manufacturer or processor in any sales contract you issued to the consumer
- Make sure that your supply contract with the manufacturer or processor covers product safety, quality control and product returns
- Have good quality control and record-keeping systems
The nature of risk, ie the viability of a claim and the premium, is affected by:
- Who the product is sold to
- How and where it is used
- Any warnings or labels provided
What is covered
PLI covers you against compensation awarded as a result of damage to property or personal injury caused by your product. Bear in mind that if someone is awarded personal injury compensation, the NHS can claim to recover the costs of hospital treatment (including ambulance costs). This applies to incidents that occur either on or after 29 January 2007.
PLI may not cover you against financial losses to a business or person caused by a faulty product which you manufactured, serviced or supplied.
PLI also covers you against unforeseen circumstances, such as product faults your quality control system couldn’t trace. However, if you simply make an inferior product, you may be unable to make a claim, or even get insurance. Bad workmanship is not covered either.
Before issuing a policy your insurer will want to know that your:
- Manufacturing or services are conducted according to industry best practice
- Staff are adequately trained
- Equipment and systems are appropriate, up to date and well maintained
- How much cover to take out – Most businesses have cover of between £1 million and £5 million. The norm is £2 million.
To reduce your premiums, implement quality control measures. This ensures lower premiums, reduces the risk of compensation claims and helps protect your reputation in the marketplace.