A liability policy will generally be issued with two limits – one for public liability and one for products liability. Normally same limits, example $20 000 000 Public Liability and $20 000 000 Products Liability.
What is product liability and how does it differ from public liability?
The term product liability is introduced for the purpose of applying a limit during the period of the policy for claims which are caused by a product of the business.
“Product Liability means your legal liability in respect of personal injury or property damage caused by or arising out of any products or the reliance upon a representation or warranty made at any time with respect to such products; but only where such personal injury or property damage happens after physical possession of such products has been relinquished to others”
What is considered a product will be defined in the policy and is usually anything manufactured, sold, constructed, erected, installed, grown, treated, altered, modified, repaired, serviced, bottled, labelled, handled, sold supplied, resupplied, distributed, imported or exported by your business and includes the packaging, labelling, advice, warnings given or omitted in connection with any products.
Example of Products Liability
You manufacture flour which you then supply to a large bakery. The flour is contaminated, the bakery does not know that it is contaminated and uses it in their cakes and bread, after they have made their cakes and bread they become aware of the contamination and all of their cakes and bread have to be destroyed as a result of your contaminated flour.