If you run an e-commerce or food business online, you might need to consider purchasing product liability insurance. Doug Kelley, Managing Director of Bluedrop Services specialist insurance Brokers provides the following advice to online businesses.
Although Product Liability cover isn’t a legal requirement, as a seller, manufacture or supplier, you have a responsibility of care towards your customers. It covers your business from any claims made against injuries, damages to property or causing illness to any buyers or users of your products.
You will need to consider this cover if, for example, you run a cosmetic, food, craft or any other business that sells physical products. Product Liability insurance covers you for any compensation claims.
Why Online Businesses Need Public Liability Insurance
Some business owners may not consider product liability insurance if they don’t physically own or sell from a store. However, it’s just as important to have this cover no matter where you sell or make your products.
This includes selling products on social media platforms such as Facebook, Instagram, Twitter and Pinterest, or if you have an online store such as eBay, Amazon, OnBuy, Etsy, Not on the High Street and other hosting platforms like Shopify. Even if you see your business as a hobby, it’s still important to have this cover in place.
Please note, if you purchase products from a manufacturer, you may still be liable for any claims made against the item. Especially if you embed your business name on the product or if you can’t trace the manufacture.
The Difference Between Making the Goods Yourself and Selling Them On
If you design and create your own products to sell online, product liability is likely to be the main part of your business insurance. You can add on liability insurance to your existing business cover. However, you should ask for advice from your insurer or broker when taking out any type of business insurance. You must fully understand what your insurance covers and if it protects the main parts of your business.
If any product you sell causes injury or damages due to a fault, you are liable for any compensation claims. For example, if you make electrical items, and the product is faulty by causing electric shocks or by over-heating, you could be held responsible.
Unfortunately, any claim can be devasting for small businesses as there is no legal limit on the size a claim can be. Product Liability protects you for the legal expenses to defend yourself even if the claim is unfounded.
If you buy your products from a manufacture and sell them on, they may be liable for any compensation and legal costs. However, if you customise or embed your name onto the product, you may be the one responsible for any claims. Especially if the product is made from outside the EU as it can be difficult to trace the original manufacture.
It is important to consider product liability insurance to protect your business, even if you don’t make the product.
Some Tips on Product Liability for Websites:
Where the Product is Made
You will need to be mindful of where you purchase your components and parts from, some insurers and customers may want to know where you sourced them and how the items are made.
Contracts and Legal Documents
If you have any agreed contracts with manufacturers or exporters, you need to have them legally checked before signing. Some contracts can hold harmless agreements and can impact your insurance so double-check this.
You may also consider purchasing product recall insurance, this will cover additional costs on top of any claims against you. These costs can include inspection, communication, destruction or replacements.
Level of Product Liability Cover
It is up to you on the amount of product liability insurance you take out. Some claims can reach up to £5 million or £10 million. Some insurance provides offer liability insurance as part of public liability cover, which protects you from compensation and legal claims for injury or damages caused by your business.
It is important to remember, if you introduce new products to your business line or if there are any other changes to your business during your insurance term, you should check that all insurance cover is still valid and will protect your business from any unexpected claims.