Product Liability Insurance

Product Liability Insurance Plan Overview:

Product liability insurance offers protection to distributors, manufacturers, retailers and wholesalers, against any legal liability arising out third party injury or damage to property which is caused by the consumption or use of the product sold or supplied. This insurance policy helps to protect a business against a legal issue and covers the expenses involved in the same.

Features and Benefits of Product Liability Insurance:

Cover

The product liability insurance covers any legal liabilities to third party arising out of injury or harm due to a product sold by a business.

Add on Cover

This policy can also be extended to cover vendors. The add-on cover is called Limited Vendor’s Liability. You can get cover for liability arising out of sales and distribution of the insured product by named or unnamed vendors.

Eligibility

This policy can be availed by product manufacturers, distributors, retailers and wholesalers. This is regardless of the fact whether the product that is insured is the final product or just a part of the final product. Some insurers also extend this policy to the Export Community, which is legally bound to take Product Liability Insurance.

Limit of Indemnity

Under the product liability policy, the “Limit of Indemnity” stands for the sum insured. This amount is determined based on two limits which are set for each accident that occurs during a particular policy period. These are- the Any One Accident (AOA) Limit and the Any One Year (AOY) Limit. The Any One Accident (AOA) Limit is the maximum sum payable for an accident, based on the nature of the product insured, the number of people affected, the type of damage, etc.

Policy Cover

The product liability insurance covers any legal liabilities to third party arising out of injury or harm due to a product sold by a business. It covers the following:

  • Bodily injury, illness or accidental death to a third party
  • Accidental damage to third party property.

Product

Any product can be insured under product liability insurance. The liability may arise out of factors such as:

  • Product defect which causes injury, loss, harm or damage to a third party or his/her property
  • Packaging defect which compromises the safety of the product and causes harm to the third party.
  • Improper use of the product, absence of warning labels/ precautions, etc. which affects the performance or quality of the product.

List of Companies Offering Product Liability Insurance Policy:

  • The New India Assurance Co. Ltd. – The product liability insurance policy provided by New India Assurance Company Limited covers any legal liability arising out of accidental injury, illness or death to a third party or damage to third party property, as a consequence of using the product manufactured and sold by the insured. The cover includes the defense costs as well.
  • Tata AIG Insurance – The product liability insurance policy from Tata AIG offers coverage on a global jurisdiction for exports. It also provides other additional benefits such as flexibility to add the vendor or buyer as an additional insured under the policy, covers defense costs, internationally accepted policy wordings and claims format, and so on.
  • HDFC ERGO - HDFC ERGO’s product Liability Insurance policy is extended to product manufacturers to protect them against legal liabilities. The cover includes cost of legally defending the insured. Other benefits offered under this policy are globally accepted policy cover, Limited Vendor’s Liability add-on cover for named vendors, etc.
  • Bharti AXA General Insurance - Bharti AXA General Insurance offers the Commercial General Liability insurance policy which includes product liability cover as well as public liability cover. This policy is extended to Indian companies that operate globally or have international associates or partners and also to foreign companies that operate in India. It provides comprehensive coverage against damage to third party property, injury or harm to third party, advertising/ personal injury and also covers medical bills associated with the incident. The Commercial General Liability policy does not cover product recall, omissions and errors, war related damages, employer’s liability, damage to the insured’s product/ property, pollution liability, etc.
  • Bajaj Allianz – The Bajaj Allianz product liability insurance policy covers any legal liability arising out of accidental injury, illness or death to a third party or damage to third party property, as a consequence of using the product manufactured and sold by the insured. The sum insured can be determined based on the worst case scenario of the maximum number of people that might be affected by the use of the product. The sum insured also covers the legal costs involved. This policy does not cover any costs which are incurred in recall of products, repairing the products, non-compliance with statutory laws, loss of goodwill, risks related to war, fines and penalties, contractual liability, failure of the product to meet intended needs, product guarantee, etc.
  • United India Insurance Company – The product liability insurance policy offered by United India Insurance Company offers legal protection against claims raised against the insured due to the manufacture and sale of defective or harmful products. All expenses involved in defending the claim for compensation is reimbursed by the insurance provider. Any compensation to be paid to the affected third party is covered under this policy, if the event falls within the scope of the policy document.

Product Liability Insurance Claims Process:

In order to make a claim under the Product liability insurance policy, the policyholder should first contact the insurer and intimate the incident at the earliest. When the business/ manufacturer/ distributor receives a court notice or summons, this should be forwarded to the insurance provider. The insurer has the authority to arrange a defense/ lawyer for handling the case.

In order to avail the claim, the incident should fall within the cover provided under the policy and should take place within the policy period. The maximum amount that is payable as claim would include the cost of hiring a lawyer and this will be determined based on the AOA Limit chosen by the insured. The Any One Year Limit will be reduced based on the claim amount paid out by the insurance provider.

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