Product liability insurance

What it means

Product liability insurance covers injury or property damage caused by a defective product the company has placed on the market. It concerns manufacturers, importers from outside the EU and sellers who put their own brand on a product, for example under a white label model.

The key is strict liability. Under the Slovak law on liability for damage caused by defective products, the producer is liable for compensation even when it was not at fault. The injured party only has to prove the defect, the damage and the causal link between them.

This cover differs from general liability insurance for operational activities, which covers damage caused by the company’s activity itself. Nor is it the same as liability for defects towards the buyer, which concerns repair or replacement of the item, not injury or damage to other property.

How it works in practice

For clients starting their own production or importing goods from Asia, we recommend arranging this insurance before the first delivery. An importer from a third country stands in the producer’s shoes towards the injured party and is often the only one they can pursue within the EU.

The limit of indemnity should match the nature of the product. For electronics, children’s products or food, a single defect can lead to mass claims, so a low limit that suffices for ordinary goods may not be enough. Territorial scope also matters if the company sells into several countries.

Documentation is part of prevention: technical sheets, declarations of conformity, quality control records and instructions in the language of the country of sale. In a dispute they matter as much as the policy itself, because they help prove the product was safe when it was placed on the market.

What to watch out for

Insurers’ policy terms often exclude product recall costs, fines from regulators or damage to the product itself. If the company wants those covered, it has to agree an extension or separate cover.

Time scope is another risk. A defective-product claim can arise years after the sale, so check whether the policy covers damage that manifests during the contract even if the product was sold earlier, and what happens after the policy ends.