Accidents do occur. Keep your business safe by understanding the difference between public liability and product liability insurance.
What is a liability policy?
When an event occurs that is not reasonably foreseeable and causes damage to another party’s property or harm to a person (other than a business employee who is normally covered by workers’ compensation), the business may be considered legally accountable for the injury or damage. Damage or injury can occur at any time and place. For instance, a customer visiting your premises may slip on a wet floor, you may inadvertently damage something while visiting a client’s premises, or a product that you have created, marketed, or provided could malfunction and injure a customer.
A public and goods liability policy will shield you from the financial consequences of such claims. The insurance will pay the costs of investigating, defending, or settling a claim that is covered by the policy, as well as the cost of compensating any affected party.
What is the definition of public liability?
The word “public liability” refers to your business’s liability to the general public, or any third party. “Public Duty” is sometimes defined as “your legal liability in respect of personal injury, property damage, or advertising injury occurring in connection with the business…… other than Products Liability” in a policy.
Examples:
- A consumer slips on a liquid spill on your property that should have been cleaned up but wasn’t; as a result of their fall, they sustain an injury;
- A client is visiting your factory to review the quality of some goods you have recently manufactured. One of your delivery drivers accidentally crashes into his car while it is parked in the company car park.
- You drop your hammer on a marble floor while working on a client’s property and cause significant damage to the expensive floor.
- You have a large advertisement poster displayed on the high street. It falls down during heavy winds causing an injury to a passer-by.
- Your building burns down during a manufacturing procedure, and your neighbours are unable to enter their properties for several days as a result of the fire. As a result, the people who live nearby are unable to carry out their daily activities. You also had client goods in your possession that were being repaired; these items were completely destroyed.
How Does Product Liability Differ From Public Liability?
The term “product liability” was coined with the intention of imposing a restriction on claims arising from a business’s product during the policy’s term.
“Product Liability” refers to your legal responsibility for personal injury or property damage caused by or arising from any products or reliance on a representation or warranty made at any time with respect to such products, but only after physical possession of such products has been relinquished to others.
A product is usually anything that is produced, marketed, changed, adapted, implemented, imported, distributed, services, labelled, bottled or exported by a business, and includes the packaging, labelling, advice, and warnings given or omitted in connection with any products, as defined in the policy.
Examples:
- You make hot water bottles, and one of them bursts owing to a production flaw, burning your customer.
- You produce wheat, which you then sell to a huge bakery. The flour is contaminated, the bakery is unaware of the contamination and uses it to make some bread. After producing a large batch of loaves, the business owner becomes aware that the flour is not fit for consumption and is forced to destroy all the bread.
- You offer computer virus protection software. Your software fails, leading to an organisation’s entire network being affected by ransomware.
- You import components manufactured in China directly from the manufacturer to make your product, and the components are discovered to contain high levels of lead, making them unsafe for human use. Because the manufacturer is not an Australian company and is not represented in Australia, you will be responsible for any lead contamination. The Australian Consumer Law Act (formerly known as the Trade Practices Act 1974 (TPA)) places this obligation on you.
In most cases, a liability policy will have two limits: one for public liability insurance and one for products liability.
Typically, a policy will cover any claims made throughout the policy period up to the set level, for as $20,000,0000 for any public liability claim for an unlimited number of claims. Claims for products liability are normally covered up to an aggregate limit, which means that during the period of insurance, all claims stemming from products cannot exceed the maximum issued, for example, $20,000,000. When the policy’s maximum for product liability claims is reached, the coverage will no longer pay claims.
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