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The legal basis for product liability claims
Under the Consumer Protection Act 1987, producers of defective products can be held strictly liable for damage they cause — meaning a claimant does not need to prove negligence, only that the product was defective and caused the loss. The term 'producer' includes manufacturers, those who put their name or brand on a product, and companies that import products into the UK from outside. Even a UK-based distributor can face liability if the manufacturer cannot be identified. For business-to-business product supply, contractual claims under the Sale of Goods Act (now the Consumer Rights Act for consumers, or contract law for B2B) also create exposure.
What product liability insurance responds to
A product liability policy responds to claims from third parties — whether individuals, other businesses, or public bodies — alleging that a product your company manufactured, supplied, or imported caused them personal injury or physical damage to their property. The policy covers your legal defence costs and any damages awarded. Claims can arise long after the product left your hands, particularly in manufacturing environments where products have extended service lives or where harm accumulates over time.
Product recall and contamination cover
Standard product liability cover does not typically cover the cost of recalling a defective or potentially dangerous product. Product recall insurance is a separate specialist cover that addresses the costs of identifying, withdrawing, and destroying recalled stock, as well as the business interruption costs associated with a recall and rehabilitation of brand reputation. For food and beverage manufacturers in particular, contamination cover — which can respond even without a proven defect if contamination is suspected — is worth considering separately.
How limits are set
Product liability limits are set per occurrence and in aggregate over the policy period. The right limit depends on the product's potential for harm, the volumes sold, and the markets supplied. A component part that could cause a major equipment failure may need a higher limit than a low-risk consumable, even if the component itself is low-value. If you supply into regulated sectors — medical devices, aerospace, automotive — buyers may contractually specify minimum PI and product liability limits; ensure your cover meets those requirements before signing supply agreements.
Frequently asked questions
If we only distribute products made by others, do we need product liability insurance?
Yes, in many circumstances. If the original manufacturer is outside the UK and cannot easily be identified or sued, a UK distributor or importer can be treated as the producer under the Consumer Protection Act. Even where liability ultimately rests with the manufacturer, you may face claims and need cover for your defence costs while that is established.
Does product liability insurance cover damage to the product itself?
No. Product liability covers damage caused by the product to other people or their property. Damage to the product itself — for example, a machine that fails and destroys itself — is a contractual warranty or quality matter, not a product liability claim. Some policies include 'damage to your products' cover, but it is distinct from third-party liability protection.
Funding for UK limited companies
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