Product liability insurance offers protection to distributors, manufacturers, retailers, and wholesalers against any legal liability arising from third-party injury or damage to property that is caused by the consumption or use of the product sold or supplied. This insurance policy helps to protect a business against legal issues and covers the expenses involved in the same.
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:
Product
Any product can be insured under product liability insurance. The liability may arise out of factors such as:
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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