Coverage of a manufacture’s or seller’s liability for losses or injuries to a buyer, user or bystander caused by a product defects or malfunctions. Product manufacturers, distributors and sellers are vulnerable to product liability litigation, including class actions, as a result of alleged defects and even when improper use is involved. Regardless of the circumstances, the product manufacturer, distributor or seller is typically brought into action and will require coverage for loss payments and defense. Product liability insurance provides protection to those organizations facing product liability exposure.
Scope of Cover
The policy covers all sums (including defense costs) which the insured become legally liable to pay as damages as a consequence of:
- Accidental death/bodily injury or disease to any third party.
- Accidental damage to property belonging to a third party.
Arising out of any defect in the product manufactured by the insured and specifically mentioned in the policy after such product has left the Insured’s premises. Coverage is written on claims made basis, i.e. a liability policy that provides coverage for an injury or loss if the claim is first reported or filed during the policy period. However, the policy offers the benefit of retroactive date, i.e. a date stipulated in a claim-made liability policy declarations section as the first date is designed to provide coverage for claims resulting for incidents that take place prior to the current policy term. Renewal claims-made polices usually have the retroactive date of the first policy issued to the insured. When this is not done, there is a gap in the coverage.