Product Liability Insurance protects a company against claims if its product causes injury, property damage or financial loss to a customer or third party.
Imagine that a company makes an electric heater and a wiring defect causes it to overheat and damage a customer’s home. The issue is no longer limited to replacing the heater. The customer may seek compensation for damaged property, injury or other proven harm.
Product Liability Insurance protects a company from the financial consequences of such claims when the event falls within the policy. It may cover injury, damage to someone else’s property, defence costs and compensation to the injured party.
In simple terms:
The policy does not make a product safer or replace quality control. It helps a business pay for the consequences of actual harm, not ordinary warranty repairs.
A claim is not always directed only at a factory or manufacturer. Depending on the circumstances, it may involve a manufacturer, importer, supplier, seller, distributor or a company that sells a product under its own brand.
For example, an electrical device may start a fire because of a defect. The customer may approach both the seller and the manufacturer. If a cosmetic product causes a burn because of an error in its ingredients or instructions, the claim may be made against the company that produced or supplied it.
The risk begins when a business places a product on the market. Where several companies take part in the supply chain, the policy should clearly state which role of the insured company is covered.
Product liability may arise in almost any industry where a company manufactures, imports or sells goods. Common examples include:
The more people use a product and the more serious the possible harm from a defect, the greater the risk for the business. Problems involving furniture, food or electrical equipment may have very different consequences, so the insured products should be listed precisely in the contract.
The contract determines the scope of cover. It usually concerns claims arising from harm caused by a product. A policy may include:
The insurer first checks whether the product is listed in the policy, when the event occurred, and whether there is a connection between the defect and the damage. Similar claims can lead to different decisions when the policy terms or evidence differ.
A warranty deals with a fault in the product itself. A kettle stops working, a phone will not charge or furniture breaks after one month: these issues are usually handled through repair or replacement under the seller’s and manufacturer’s rules.
Product liability begins when the fault causes separate harm. For example, the kettle catches fire and damages a kitchen, defective construction material ruins a renovation, or a food product causes poisoning.
Replacing a defective product and compensating for harm are different costs. Liability insurance may cover the second, but it does not necessarily pay to replace the product under warranty.
No policy covers every problem involving a product. Exclusions and limitations may include:
Quality control, certification, clear instructions and safe production remain the responsibility of the business. Insurance responds only to accidental events and costs expressly included in the contract.
The costs do not end with compensation to the injured party. A company may need lawyers, expert reports, negotiations and document checks. A dispute may also affect relationships with partners and the company’s reputation.
The risk is especially relevant for businesses with many customers, supplies to retail stores, participation in tenders, exports or products sold under their own brand. The policy provides financial support for the defence, but it does not guarantee payment for every claim.
When a company receives a claim, it reports it to the insurer. The insurer then reviews the product, the circumstances of the harm and the connection between them.
The review may require:
The insurer also checks whether the product was used incorrectly and whether an exclusion applies. If the event is covered, the policy may pay agreed legal costs and compensation within the insured amount.
Manufacturer — a company or entrepreneur that produces, assembles or labels a product under its own brand. In some circumstances, an importer, supplier or seller may face a similar risk.
Product defect — a problem in the design, manufacturing, ingredients, instructions or labelling that makes a product unsafe.
Third party — a customer, client or owner of property harmed by the product.
Claim — a request for compensation. Until the insurer decides, the request itself does not mean the event is covered.
Legal costs — spending on advice, expert review and defence of the company’s position.
Exclusions — circumstances and costs that the contract does not cover.
Price alone is not enough to compare policies. Check:
A product that is absent from the contract may remain uninsured. Review the product list before the policy is issued.
A company in Tashkent makes electric heaters and supplies them to stores. One batch has a wiring defect. A customer in Samarkand uses a heater that overheats and damages a socket, furniture and part of the room finishing. The preliminary loss is 65 million soums.
The customer makes a claim against the seller and the manufacturer. The company gives the insurer the batch records, certificates, instructions, photographs and a service specialist’s report.
The insurer then checks four points: whether the product is listed in the contract, whether the defect caused the damage, whether the customer used the heater correctly and which costs the policy covers. If the event is confirmed as insured, the contract may pay defence costs and compensation within its limits.
The policy may be useful for producers of food, home appliances, furniture and construction materials, equipment importers, distributors, wholesale suppliers and companies that sell goods under their own brand.
Use a practical test: estimate the possible cost of expert review, lawyers and compensation if one product damages a customer’s property or health. Compare that amount with the policy terms. Cover will still depend on the contract and the circumstances of the individual claim.
Aziz’s company in Tashkent produced electric heaters. One device from a batch overheated at a customer’s home in Samarkand and damaged a socket, furniture and part of the room finishing for about 65 million soums.
If the product defect and its link to the damage were confirmed, Product Liability Insurance could help cover the customer’s claim and legal defence costs. The policy does not replace quality control, but it helps the business handle the financial consequences.
Shakhnoza from Fergana supplied construction materials under her own brand. After renovation, a client said that part of the material was defective and damaged the interior finishing for 48 million soums.
The insurer checked the documents, product batch and how the material was used. Part of the claim was covered, but replacement of the product itself under warranty was not included in the payment because it was not covered by the policy terms.
Bekzod from Andijan imported a small batch of home appliances without separate Product Liability Insurance. One item caused property damage to a customer, and total legal and settlement costs reached 80 million soums.
Because there was no policy, the company had to pay for the dispute and compensation itself. After that, Bekzod decided to insure liability for products sold under his own brand or imported from abroad.
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