Product Liability Insurance for Online Retailers

If you run an online store, manufacture products or resell items direct to the public , it's vital to know about product liability insurance. If a product you have sold or manufactured causes injury to a member of the public or in some way damages their property, you could be held responsible and liable. Beware, there is no limit to the value of the claim.

What is product liability insurance for?

Product liability insurance protects against claims of personal injury or property damage caused by products sold or supplied through your business. It is designed to help protect your business by ensuring that if this happens, your business will not suffer financially. Your insurance company will pay any compensation due plus legal expenses or court costs. Manufacturers, distributors, suppliers and retailers could all be liable if a product or a component part causes injury or damage.

"Do I need product liability insurance for my online shop?"

 The short answer is yes! But here are some of the situations where a business would need product liability insurance: 

  • Any company that sells a product with their business or brand name on it.

  • Any firm that manufactures a product.

  • Any business that imports products from outside of the European Union for sale in the UK.

  • Manufacturers and retailers that supply own-brand products.

  • Any business that repairs, alters or services an existing product.

  • Someone who repurposes or rebrands an existing product.

  • Importers of products from places where the safety requirements differ from the country it is sold in.

In addition to this, if the actual manufacturer has gone out of business or cannot clearly be identified the seller of the product could be held liable.

Exceptions to consider

Not every business will need product liability insurance. For example, a drop ship business provides a service rather than a product. This may sound odd but drop shippers are actually agents for the manufacturers or resellers. Therefore they may not require product liability insurance. Equally, service based companies that do not sell products as part of their service will not need this kind of cover. Although they will need the equivalent insurance 'professional indemnity' which covers claims for mistakes in the service being provided that lead to a loss being incurred by the customer. For example, an online marketing consultant who charged a client for creating Ad campaigns but were based on inaccurate or unsuitable keywords could be liable to a claim for wasting the clients' money on inaccurately targeted campaigns.

Retailers and duty of care

Whilst retailers and distributors tend not to be held directly responsible in a product liability claim, they are still responsible for providing a duty of care to their customers. This means that customers must be given clear instructions on how to safely use a product and made aware of any risks that can occur when using the product in its intended fashion. If the manufacturer cannot be traced, usually to their registered office, then the buyer has the right to

Why you need to maintain your product liability cover

A customer that experiences injury due to a product fault has three years to bring a compensation claim against a manufacturer. In some instances, the timeframe can be even longer. This means that businesses should maintain their cover even if they pause or cease operations. Additionally, there are no legal limits for a maximum cost claim. Any customer claim being assessed is on an individual basis. the judge will calculate a suitable figure depending on the scale of loss or injury incurred. Whilst it is not yet a legal requirement, businesses are wise to ensure they have a generous level of cover. Failure to do so cold wipe out the company in the event of a claim.

What to look for when buying product liability insurance

One good source for pricing and more specific information for online retail insurance is www.directlineforbusiness.co.uk. Some products will naturally have greater potential risks to customers than others, so do ensure that your policy has adequate cover in place and check carefully for exclusions and stipulations. For example, as an on line seller what is expected from you with regard to quality control? Additionally, a good insurance broker can advise you on the right insurance cover for your business. They can help explain if you need public liability insurance and/or employers liability insurance for your business.

Find out more at: https://www.gov.uk/guidance/product-liability-and-safety-law