Products Liability Policy
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This policy covers all sums (inclusive of defence costs) which the insured becomes legally liable to pay as damages as a consequence.
This policy covers all sums (inclusive of defence costs) which the insured
becomes legally liable to pay as damages as a consequence of:
accidental death/ bodily injury or disease to any third party.
accidental damage to property belonging to a third party.
arising out of any defect in the product manufactured by the insured and
specifically mentioned in the policy after such product has left the insured's
The policy offers the benefit of retroactive period on continuous renewal of
policy whereby claims reported in subsequent renewal but pertaining to earlier
period after first inception of policy, also become payable.
The defect in the product may be a manufacturing defect or may even be due to
faulty packaging, delivery specifications or instructions as to use of the
The policy covers the sales turnover of the company- both domestic and/or
The policy is on a claims made basis i.e. the claims must arise and be made in
writing on the insurance company during the policy period.
The policy does not cover any liability for product recall, product guarantee,
pure financial loss such as loss of goodwill or loss of market. The policy also
does not pay for the cost incurred for repairing or reconditioning or modifying
the defective part of the product.
Add on covers
The policy can be extended to cover liability arising out of judgments or
settlements made in countries which operate under the laws of U.S.A or Canada
(which is an exclusion under the policy) by opting for the North American
The policy can also be extended to cover Limited Vendors Liability for named or
unnamed vendors. Limited vendors liability means liability arising out of the
sale and distribution of named insured products by vendors with original
warranties and instructions of use of the product specified by the
Who can take the policy?
The policy can be taken by the manufacturer of any product whether it be the
final product or part of the final product.
How to select the sum insured?
In Product Liability Policy, the sum insured is referred to as Limit of
Indemnity. This limit is fixed per accident and per policy period which is
called Any One Accident (AOA) limit and Any One Year (AOY) limit respectively.
The ratio of AOA limit to AOY limit can be chosen from the following:
The AOA limit which is the maximum amount payable for each accident should be
fixed taking into account the nature of product covered and the maximum number
of people who could be affected and maximum property damage that could occur,
in the worst possible accident after sale of the product.
How to claim?
In case of any event likely to give rise to a liability claim as described
above, insurance company should be informed immediately. In case any legal
notice or summons is received, it should be sent to the insurance company. The
company has the option of arranging the defence of the case.
The event giving rise to the claim should have occurred during the period of
insurance or retroactive period and the claim first made in writing against the
insured during the policy period. The maximum amount payable including defence
cost will be the AOA limit selected. The Any One Year limit will get reduced by
the amount of claim or indemnity paid for any one accident. Any number of such
claims made during the policy period will be covered subject to the total
indemnity not exceeding the Any One Year limit.
Note: Policy details given are indicative, not exhaustive. Please contact your nearest NIA office for further details.
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