Every company that puts products on the market has a high liability risk. If something goes wrong with the products and this causes damage to third parties, the manufacturer should expect high claims for damages. For small and medium-sized businesses, this can quickly become a life-threatening situation. What companies need to know about product liability and what manufacturers should pay attention to when entering into a contract.
For example, if a manufacturer ships a control with a design flaw, it’s annoying. If the damage is caused by the defective product, the question arises: Who is responsible? “Under the Product Liability Act (ProdHG), every manufacturer is liable for damages to third parties arising in connection with defective products, even if they are not at fault,” explains Michael Staschik, Head of the SHU Business Unit. Firmenindividual in Nürnberger. Versicherung.
What does product liability mean?
But not only manufacturers, but also merchants, artisans and so-called quasi-manufacturers can be affected by claims for damages if they put defective products into circulation. “If, for example, a food company receives packaging material that gives off an unpleasant taste, the manufacturer has to pay for the damage caused,” says Staschik. “But missing warnings can also fall under product liability, for example if a person is injured by mishandling the object.”
Product liability insurance is practically essential
For suppliers that have large quantities of a product in circulation, damage claims are often a huge blow. Small and medium-sized businesses, in particular, can quickly reach their financial limits in such a situation. “Proper insurance protection is therefore a must for virtually every manufacturing company in every industry, but also for distributors,” says Staschik. “It is especially important to make sure that the sum insured is high enough when taking out the policy.” In some cases, product liability insurance included in commercial liability insurance may be sufficient.
Consider your own liability risk
From the small artisan business to the medium-sized food manufacturer and wholesaler, liability insurance is a must for all manufacturing businesses. It occurs when a manufactured product causes personal injury or property damage. “However, damage claims due to defective products can quickly exceed the scope of insurance,” Staschik warns.
This may be the case, for example, if the defective products delivered have already been processed or installed. “Then the so-called extended product liability insurance is necessary. This is primarily aimed at suppliers whose products are processed by others”, says the expert from the Nürnberger Versicherung. “So companies need to check exactly how high their individual liability risk is.”