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Products liability insurance

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Frequently asked questions about products liability insurance

Products Liability Insurance is among the most common and crucial insurance policies that businesses consider in New Zealand. We’ll answer some of the most frequently asked questions about it.

Products Liability Insurance Requirements and Coverages

What Does Products Liability Insurance Cover?

Products liability insurance primarily covers the legal costs and damages related to claims that a product your business made or supplied caused injury or harm. This could range from physical harm to a customer, property damage, or even issues related to the product’s marketing like mislabeling or misleading instructions.

Who Requires Products Liability Insurance?

If your business involves the design, manufacture, or supply of products to customers, you should strongly consider products liability insurance. This is especially the case if the products are physical items, potentially harmful, or used in high-risk environments. Examples of these businesses range from toy manufacturers to construction equipment suppliers.

What is not Covered under Products Liability Insurance?

While products liability insurance offers wide-ranging coverage, it does not cover everything. The intentional wrongdoing or reckless disregard for safety by your business isn’t covered. It also won’t cover financial losses caused by a product not performing as intended or advertised, unless it caused physical harm or property damage. Finally, recall costs are not usually covered, unless specifically added into your policy.

Does Products Liability Insurance Cover Legal Costs?

Yes, a significant benefit of products liability insurance is the coverage of legal defense costs. If a claim regarding your product ends up in court, your policy can cover the costs of your defense, irrespective of whether your business is at fault.

Products Liability in New Zealand

What is Unique About Products Liability Insurance in New Zealand?

In New Zealand, products liability insurance coverage is often included with public liability insurance. This isn’t always the case in other countries where they are often sold as separate policies. 

Does Every Business in NZ Need Products Liability Insurance?

While it is not legally mandatory, it is highly recommended for businesses that manufacture, supply, or sell products. The risk associated with potential claims can be financially devastating for a business, particularly smaller operations.

Is Products Liability Insurance Expensive in New Zealand?

The cost of products liability insurance in New Zealand is typically $30 – $60 per month however it varies depending on several factors such as the type of product, the scale of production, and the business’s safety record. Seeing as this products liability is often included by default as part of a public liability policy, this insurance is extremely cost effective. 

 

How to Buy Products Liability Insurance with Gerrards

How Long Does it Take to Buy Products Liability Through Gerrards?

At Gerrards, we streamline the process for you. We can get multiple quotes from top insurers within 24 hours or less. Our experienced team can help determine the right coverage limits and find the best fit for your business, providing you with a certificate soon after.

What is a Products Liability Insurance Certificate?

The products liability insurance certificate is your proof of insurance. It outlines the specifics of your policy, such as the coverage limit, the period of insurance, and what specifically is covered.

What Industries Does Gerrards Offer Cover For?

At Gerrards, we can provide coverage for businesses across a wide range of industries. Whether you’re in manufacturing, food production, construction, retail, or any other sector, we’ve got you covered.

How Much Products Liability Insurance Do I Need?

The amount of coverage needed varies based on the type of product, the size of your business, and the potential risks involved. It’s best to discuss these specifics with our team at Gerrards so we can guide you to a tailored solution.

Products liability insurance claims

How Do I Make a Products Liability Insurance Claim?

To make a claim, simply get in touch with us at Gerrards. We will handle the process with the insurance company for you, advocating on your behalf to make sure you’re treated fairly and promptly.

What Are Some Common Products Liability Claims?

Consider a scenario where a local toy company had released a new toy car onto the market. After a few weeks of its launch, reports came in from various parents claiming that small, detachable parts of the toy were a choking hazard to their young children. In one severe instance, a toddler was rushed to the hospital due to choking on a wheel that came off from the toy car. This led to a significant claim against the company for medical expenses, emotional distress, and potential reputational damage.

Imagine a beauty brand that launched a new line of organic lipsticks. Soon after its release, a significant number of customers experienced severe allergic reactions. One customer, in particular, had to be hospitalized due to swelling and difficulty breathing, all traced back to an undisclosed allergen in the lipstick. The brand faced multiple claims related to medical costs, and compensation for pain and suffering caused by their product.

A construction company purchased a crane from a reputed manufacturing firm for a major building project. However, a few days into operations, the crane malfunctioned due to a defect in the pulley system, causing a serious accident on site. The construction company, after dealing with the fallout, filed a substantial claim against the crane manufacturer for the damage caused to the project, medical costs for injured workers, and the delay in the construction schedule..

Let’s take the example of a local bakery that started selling gluten-free bread to cater to more health-conscious customers. However, due to a miscommunication in the supply chain, the bread contained small traces of gluten. A customer with Celiac disease consumed the bread, assuming it to be completely gluten-free based on the label, and suffered a severe reaction. The customer filed a claim against the bakery for medical expenses, emotional distress, and misleading marketing.

Is products liability insurance worth is?

Deciding whether or not to invest in products liability insurance can be complex. To help you weigh your decision, consider these pros and cons:

Pros:

  1. Financial Protection: Products liability insurance protects against potentially crippling financial costs arising from claims related to your products. This could include legal defense costs, settlement fees, or damages awarded by the court.

  2. Business Reputation: Having insurance not only safeguards your business financially, but it can also help maintain your reputation. Knowing that you’re insured and can manage claims effectively can provide reassurance to your customers, suppliers, and business partners.

  3. Legal Requirement: While not a legal requirement in New Zealand, some contracts or clients might require you to have products liability insurance in place before they will do business with you.

  4. Risk Management: It’s almost impossible to completely eliminate the risk of a product defect or harm caused by a product. Even with the best quality controls in place, things can go wrong. Products liability insurance is a key way to manage this risk.

Cons:

  1. Cost: Like all insurance policies, products liability insurance is an added cost to your business. The premium can vary depending on the level of risk associated with your products.

  2. Policy Exclusions: Not all scenarios may be covered by a standard products liability insurance policy. Exclusions might include intentional wrongdoing, or claims related to product recall, meaning you may need additional coverage for comprehensive protection.

  3. Complexity: Understanding and managing an insurance policy, and any claims process, can be complex and time-consuming. That said, working with an experienced broker like Gerrards can help navigate these complexities.

  4. Potential Over-insurance: If your business has a very low risk of product liability issues, you may not need your own policy. Each business should assess its own risk and insurance needs.

Products liability policy changes

What Happens If I Need to Change My Insurance Later?

If your business evolves, or the risks change, you may need to adjust your coverage. At Gerrards, we can work with you to ensure your policy remains up-to-date and continues to provide the protection you need.

What Happens If I Cancel My Products Liability Policy?

Cancellation leaves your business exposed to financial risk. Any claims made after the policy is cancelled will not be covered, which could result in significant out-of-pocket costs if a product-related issue arises.

How does products liability insurance compare with other policies? 

While products liability insurance covers harm caused by your products, public liability covers harm caused by your business operations more generally. This could include someone tripping over a cable at your office, for example. In New Zealand, these are often bundled together in a combined policy.

General liability is a broader category of insurance that often includes both public and products liability cover.

Manufacturers liability is a specific subset of products liability insurance that is tailored for businesses that manufacture goods. It covers the risks surrounding products much more comprehensively. 

Do you have further questions about products liability insurance NZ?

We hope this guide has shed light on the intricacies of products liability insurance in New Zealand. However, we understand that every business is unique, and you might still have questions specific to your situation. At Gerrards Insurance Brokers, we’re here to help. If you have any further queries about products liability insurance, or any other insurance need, please don’t hesitate to contact us. Our team of experienced professionals is always ready to provide personalised advice and solutions tailored to your business. 

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