Q&As

What is Products Liability Insurance?

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Published on LexisPSL on 24/07/2017

The following Insurance & Reinsurance Q&A provides comprehensive and up to date legal information covering:

  • What is Products Liability Insurance?
  • Nature of Products Liability Insurance
  • Legal liability
  • To a third party other than an employee
  • Damages/compensation
  • For death etc
  • In connection with business
  • Caused by a ’Product’
  • Exclusions
  • Form

What is Products Liability Insurance?

Nature of Products Liability Insurance

Products Liability insurance is a type of public liability insurance which typically covers sums which the assured:

  1. becomes legally liable to pay

  2. to a third party other than an employee

  3. as damages or compensation for

  4. death, personal injury or property damage

  5. happening in connection with the assured’s business, and

  6. caused by a Product supplied by the assured

Legal liability

The policy only responds to legal liability. Ex gratia payments or sums paid for commercial expediency are not covered.

The underlying purpose of the policy is to cover tortious liability in negligence, not general contractual liability, although strict liability under the Consumer Protection Act 1987 is included. Some policies also cover contractual liability where there is a parallel tortious duty.

To a third party other than an employee

Liability to employees is invariably covered separately by compulsory Employers’ Liability insurance.

Damages/compensation

Whether exemplary or punitive damages are covered, it depends on the wording of the policy. Exemplary damages are generally covered unless specifically excluded, but punitive damages are not ‘compensation’.

The assured’s liability must be ‘for’ the specified physical damage. Following normal tort principles, directly consequential financial loss recoverable by the third party as part of its damages for a physical loss is covered (See Rodan International Ltd v Commercial Union Ass Co Ltd [1999] LRIR 495 (not reported by LexisNexis®)). Liability for pure economic

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