Does your business, make, import, sell, distribute, repackage or repair products, if so, you can be legally liable for personal injury or property damage, as well as any resulting financial loss due to faults or problems in the product.
Do you operate a business from home? If you do, then it’s important to know your home insurance doesn’t automatically cover product or public liability exposures.
What is product liability insurance?
Product liability insurance is different form public liability insurance. Product Liability provides cover for legal defence costs, as well as any damages awarded by a court relating to injury or damage caused by your products. As mentioned, products include anything that you import, distribute, wholesale, relabel, repackage, or repair.
Under the Australian Consumer Law (ACL), importers are considered the manufacturers, giving them an extra level of responsibility, mainly because it can be very difficult for customers to make a claim or sue an overseas company.
Examples of claims include, hazardous toys injuring children, phone recharges that cause house fires, salmonella in food or faulty airbags in cars, causing injuries to the customer that purchased the item or the person using it.
So, taking out product liability insurance as protection against potentially having to pay legal defence costs that can amount to tens or even hundreds of thousands of dollars, plus pay damages awarded by a court, is a great way to manage that financial risk for a fixed amount each year
Product safety issues that may affect your insurance cover
Product safety is always a high priority for manufacturers, importers and sellers of goods. The General Liability Report from Wotton & Kearney lawyers provides topical examples of product safety issues that have risen since the pandemic.
Product Liability claims regularly make heading lines, recent cases include, injuries caused by medical devices, IUD, pacemaker and implants; failure of Takata car airbags; salmonella in lettuce etc.
Another relevant example was the global shortage of alcohol-based hand sanitisers which resulted in the importation of methanol so that local businesses could manufacture this product in Australia. Subsequent product safety concerns led to a 2% standard being imposed on methanol. In addition, there’s the case against Amazon as a distributor of consumer products and whether they’re liable for the products sold on its site. This is particularly relevant given that many small businesses have moved into the e-commerce space since the pandemic.
Yet another example of current product safety issues is the regulation of face masks that are intended to protect against disease. Considered as medical devices, the TGA regulates face masks under the Therapeutic Goods Act 1989. This means that importers, suppliers and manufacturers of face masks have obligations under this Act.
All these examples demonstrate the importance of product liability insurance to businesses that supply, sell or manufacture goods sold to consumers and other businesses.
Guarantee of Acceptable Quality and Fit for Purpose
The Australian Consumer Law (‘ACL’) has been in place since 2010. It’s the principal consumer protection law and applies the same in all States and Territories. It has recently been updated to apply to any consumer, which is a person of small business buying or selling goods for up to $100,000, that are used for ordinarily used for personal or household use. Such as solar hot-water systems, cars, electrical cables or alarm systems. The practical impact on importers, wholesalers, distributers and retailers is that Consumers or small business have a Guarantee that the goods supplied to them are acceptable quality and fit for any purpose that the customer said they were purchasing the goods for. If the item is not suitable, defective or causes any loss or damage, the seller is responsible. The ACL also says that importers or Australian distributors of overseas companies are the manufacture under Australian Law.
To discuss Product Liability and insurance needs, talk to your local insurance adviser.
This communication including any weblinks or attachments is for information purposes only. It is not a recommendation or opinion, your personal or individual objectives, financial situation or needs have not been taken into account. This communication is not intended to constitute personal advice. This type of insurance product is designed for small and large businesses, that want to be covered against financial loss relating to accidents or personal injury involving contractors or sub-contractors.
We strongly recommend that you consider the suitability of this information, in respect of your objectives, financial situation and needs before acting on it. This document is also not a Product Disclosure Statement (PDS) or a policy wording, nor is it a summary of a particular product’s features or terms of any insurance product. If you are interested in discussing this information or acquiring an insurance product, you should contact your insurance adviser to obtain and carefully consider any relevant PDS or policy wording before deciding whether to purchase any insurance product.