Question

Are there some products that cannot be insured for product liability?

Answer
By Jacques Wong | Last updated: February 6, 2018

Are there some products that cannot be insured for product liability?

The quick answer is yes and no. (I know. Useful, right?)

Let's flesh this out a bit.

Businesses are held accountable for their products. If a customer purchases a product and a defect in it causes either bodily injury, sickness, or property damage, the manufacturer or the retailer may be held liable.

In insurance terminology, a defect means that something was either missing or something that should have been included was left out. This generally applies to a design or manufacturing defects (say, a kitchen appliance with a part of a few screws missing) but it can also apply to marketing defects (missing or incorrect labeling or instructions).

Most product liability insurance policies are pretty complicated, and there is currently no cross-industry standard. But insurance companies will exclude products (or products containing certain ingredients) in order to limit their risk exposure, so there are some risky products that most companies won't insure.

Outside of those that are blatantly illegal, there are, for example, products in certain "high-risk" industries (pharmaceuticals, dietary supplements, "nutraceuticals", and so on) are typically excluded from typical product liability policies. But in some circumstances, even these products can be negotiated back in.

I recently had a client, for instance, who wanted to buy some insurance for his herbal supplement manufacturing business. When negotiating with the underwriters, it became clear that there were several ingredients that would exclude a product from coverage if it contained them. These weren't just illicit or inherently dangerous ingredients, but also included several common ones like creatine and St. John's wort. As mentioned above, however, these exclusions are not always set in stone. In this case, I could use my client's experience and good track record to have those exclusions waived.

In summary, insurers are reluctant to insure medicines and other products meant for human consumption. Beyond those, however, there is little broad-based consensus about what products should be excluded.

Share this Q&A

  • Facebook
  • LinkedIn
  • Twitter

Tags

Coverage Liability Insurance Commercial Lines Product Liability

Written by Jacques Wong

Profile Picture of Jacques Wong

Jacques grew up around the insurance industry and began actively participating in 2013. Since then, he has gotten a Level 2 license, won Insurance Council of BC awards in 2015 and 2020 for academic excellence in the insurance licensing courses. He educates insurance professionals through PNC Learning and as a Thought Leader at ReFrame Insurance.

In his day job as an insurance broker, he helps businesses with creative risk management solutions and strategic advice when it comes to insurance.

More Q&As from our experts

Related Articles

Term of the Day

Eligible Employee

An eligible employee is a worker who has spent twelve or more months on a job or rendered 1,250 hours or more of service for...
Read Full Term

Subscribe To the Insuranceopedia Newsletter!

Do you want to stay on top of New Terms, New Products, Free Software, and Specials? Join one of our email newsletters. It's fast and easy. You will be among the first to know about hot new insurance related articles, goodies and great deals - it will only take seconds!

Resources
Go back to top