Product liability and insurance

Why understanding product liability matters

If a defective product causes injury or property damage, your business can face compensation claims regardless of whether you were at fault. This is strict liability under Part I of the Consumer Protection Act 1987 (CPA 1987). It applies to manufacturers, own-brand suppliers, importers, and in some circumstances retailers and distributors.

Strict liability means a claimant does not need to prove negligence. They need only show that the product was defective, they suffered damage, and the defect caused the damage. You cannot exclude or limit this liability by contract.

Understanding how strict liability works, what defences are available, and how insurance protects your business is essential for anyone placing products on the UK market.

Statutory defences under the CPA 1987

While strict liability removes the need for a claimant to prove fault, the CPA 1987 does provide six statutory defences under section 4. If you can establish any one of these defences, liability is avoided entirely.

The most commercially significant defence is the development risks defence (also known as the "state of the art" defence). This protects producers who can show that the state of scientific and technical knowledge at the time the product was supplied was not such that a producer of products of the same description might be expected to have discovered the defect. In practice, this is a high threshold - you must show that the defect was genuinely undiscoverable, not merely that your own testing did not find it.

The other defences cover situations such as compliance with mandatory legal requirements, not being the actual supplier, or the product not being supplied in the course of business. Each defence requires positive proof from the defendant.

Practical implications for your business

Strict liability creates several practical consequences that affect how you run your business:

Who can be sued

Claims can be brought against any party in the supply chain. Manufacturers bear primary responsibility, but importers are treated as producers for products brought into the UK. Retailers and distributors can also be liable if they cannot identify their own supplier within a reasonable time when asked by the injured party.

This means that if you import products from overseas, you carry the same strict liability as the original manufacturer. If you are a retailer, maintaining clear records of your supply chain is a practical necessity, not just good practice.

What counts as a defect

A product is defective if its safety is not such as persons generally are entitled to expect. This takes into account the way the product is marketed, instructions and warnings provided, and what might reasonably be expected to be done with the product. The test is objective - it does not matter what your business intended.

Limitation periods

Claims must be brought within 3 years of when the claimant became aware (or should reasonably have become aware) of the damage, the defect, and the identity of the producer. There is an absolute long-stop of 10 years from when the specific product was supplied.

These limitation periods make record retention critical. If a claim is brought 8 years after supply, you need to be able to demonstrate what the product was, how it was tested, and what standards it met at the time.

Why insurance is essential

Products liability insurance is not legally mandatory for most businesses (unlike employers' liability insurance). However, it is effectively essential for any business that manufactures, imports, or sells physical products. Here is why:

• Strict liability means claims can succeed without fault: Even if you followed every reasonable precaution, a defective product can generate a valid claim. Insurance covers the compensation and legal costs.
• Claims can be substantial: Personal injury claims for defective products regularly reach six or seven figures. Property damage claims can also be significant. Without insurance, a single claim could bankrupt a small business.
• Client contracts often require it: Many retailers, distributors, and online marketplaces require suppliers to hold products liability insurance as a condition of trading.
• It covers legal defence costs: Even defending an unsuccessful claim is expensive. Insurance covers solicitor fees, expert witnesses, and court costs.

Typical cover levels range from 1 million to 10 million pounds, depending on the products, volume, and markets served. Businesses importing or manufacturing products that could cause serious injury should consider higher limits.