The Risk

In any business where there is a physical end product there will also be contingencies that arise from its failings. There are some very specific contingencies that we can help you with in protecting your balance sheet and brand, particularly with the growth of globalization with Indian companies expanding overseas, exports increasing and more International companies forming local Joint Ventures to work in India. We have expanded further on these below.

A.Products Liability

The Risk

The product causes personal injury or property damage to Third Parties e.g.

  • A child swallows the eye of a doll that has become detached
  • A new heater short circuits setting a warehouse on fire

The Solution

Products Liability insurance covers your liabilities as the seller or supplier (including manufacturer, wholesaler, etc. of goods in respect of

  • physical injury to a third party or
  • damage to a third parties property that may arise from the product after it has left your immediate control.

The Cover

  • The damages awarded within a court of law
  • Your costs and expenses relating to the claim

Basis of Cover

It is a Claims Made basis normally, in that the cover is only effect if the claim is made during the actual year of insurance.

Premiums

The premiums vary according to the limits purchased, the turnover relative to the product, the type of product being covered and the previous risk experience. In view of the legal environment, covers in respect of North America will carry an increased premium.

Exclusions

There are exclusions and these need to be reviewed carefully. Our role as brokers is to take you through these and ensure you understand them thoroughly, challenging any that are particularly restricting and/or reasonable.

Who should consider taking these covers?

Anyone who is involved in retailing, wholesaling, selling or supplying a product to market.

N.B. It is not only the high hazard products that require coverage - some significant claims have arisen from relatively harmless goods e.g. toys, aerated water, nightwear.

B. Products Recall

The Risk

You have a duty after the discovery of any defect or danger in a product supplied to take precautions (including a recall of the product if necessary) against injury or damage caused by it. You decide therefore to recall such a defective product before it causes such injury or damage to third parties and to your brand reputation. Prime examples over recent years have included tyres, mineral water and chocolate.

The Cover

Product Recall Liability Insurance indemnifies the insured for those sums that the insured becomes legally obligated to pay as compensatory damages arising out of recall, removal, recovery of possession or control, or disposal of the Product that is manufactured, sold, marketed, handled, or distributed by the insured. Product Recall Insurance is typically provided as an add-on to a Product Liability Insurance policy.

Product Recall Expenses

Product Recall Expenses are also covered under the policy. These are the reasonable and necessary costs incurred during the 12 month period commencing on the first day such costs are incurred by reason of recall, recovery, disposal, or withdrawal. These are limited to:

Extensions

Product Recall Expenses can be extended to include the following (upon the discretion of the insurer):

This insurance applies only when physical possession of the Product has been released by the insured to others.

Key Exclusions

C. Product Guarantee

The Risk

Product Guarantee can be either a first party cover in respect of the cost of repair, removal, replacement and/ or treatment of products failing to perform their intended function or a third party cover where the other party suffers financial losses following the non-performance of your product.

What does it cover?

Depending on whether the risk is of the first or third party kind, it can include the costs of rectifying the product, the legal liabilities arising from a third parties financial loss and the costs and expenses suffered by either parties within the claim.

D. Product Contamination or Tampering

The Risk

Here we are concerned with products that are prone to tampering or contamination. This is particularly common in mass market environments such as supermarkets.

What does it cover?

This is effectively a first party product recall coverage for the specific risks of accidental contamination or product extortion and standard cover can include adverse publicity, consequential losses, third party recall costs and crisis management.

Generally

What is the basis of cover?

It is a Claims Made basis normally, in that the cover is only effect if the claim is made during the actual year of insurance.

What are the premiums?

The premiums vary according to the limits purchased, the turnover relative to the product, the type of product being covered and the previous risk experience. In view of the legal environment, covers in respect of North America will carry an increased premium.

Are there exclusions to the cover?

Yes, there are exclusions and these need to be reviewed carefully. Our role as brokers is to take you through these and ensure you understand them thoroughly, challenging any that are particularly restricting and/or reasonable.

Who should consider taking these covers?

Anyone who is involved in retailing, wholesaling, selling or supplying a product to market. N.B. It is not only the high hazard products that require coverage - some significant claims have arisen from relatively harmless goods e.g. toys, aerated water, nightwear.

  • Communications to notify others of a recall, removal, recovery or disposal of a product, including but not limited to radio and television announcements and printed advertisements.
  • The cost of shipping the Product from any purchaser, distributor or user to the place of Insured.
  • The actual cost of disposal of the products, but only to the extent that specific methods of disposal other than those usually employed for trash discarding or disposal, are required to avoid bodily injury or property damage as a result of such disposal.
  • The extra expense to rent additional warehouse or storage space.
  • The cost to hire additional persons other than your regular employees to assist in the process of communication,shipping and other ancillary responsibilities arising out of a recall, removal, recovery or disposal of a product.
  • The total amount of refunds given to purchasers, not to exceed cost of goods sold
  • The cost to repair the Product, including the cost to return the Product to the purchaser, and the cost to repair unsold finished stock
  • If the Product is replaced, the cost to produce or acquire a like replacement product, including the cost to return the Product to the purchaser, not to exceed the cost of goods sold
  • If the Product cannot be repaired, reconditioned, decontaminated or otherwise treated so as to render it marketable, the cost of unsold finished stock.
  • A decrease in product sales realized subsequent to the announcement of a Recall and due to loss of customer faith or approval, as well as costs incurred to attempt an increase in product sales or to regain customer approval
  • Expenses incurred because your product is similar to, or has the same trade or brand name but is of a different batch than, the product which has been recalled.
  • The costs or expense to repair, recondition, decontaminate or otherwise treat the recalled products so as to render them marketable.
  • Natural deterioration, decomposition or transformation of chemical structure except as a result of error or omission in the manufacture of the products.
  • Failure of the Product to accomplish their intended purpose.
  • Breach of warranties of fitness, quality, efficacy or efficiency.
  • An intentional act or omission that was known or should have known to lead to a Recall
  • Sale of the Product that had been banned or declared unsafe by any governmental authority.

For Further Information Contact:

Mr Vibhaw Kumar

Senior Vice President – Liability & Special Risks

Telephone

+91-22-6655 8810

Email

vibhaw.kumar@howdenindia.com