The big problem with your product liability insurance

Well Covered


Nike went from “Just Do It” to “just blew it” when one of its basketball shoes tore apart spectacularly on US national television, causing superstar Zion Williamson to hit the floor clutching his knee, before hobbling off the court. 

The sneaker blowout wiped $2 billion off Nike’s market value overnight and raised serious questions over who would be to blame if he was seriously injured as a result.

Luckily for Williamson, the blowout caused only a “mild” knee sprain, and Nike’s swift response and celebrated history means it’s not expected to suffer any long-term brand damage. But not all businesses are so lucky, well-established or well-resourced.

Here we take a look at the importance of product liability insurance, and how to make sure you’ve got appropriate cover.

What is product liability insurance

Product liability insurance is designed to protect your business if you’re sued depending how a product you sell, assemble or supply has caused harm to a person or their property.

It can help you cover the cost of investigating and defending your business against a claim made against you and your product. It can also cover the cost of any damages awarded to a customer if your business is found to be at fault.

Businesses that may need product liability insurance range from multinational manufacturers – such as Nike – to local developers, parts suppliers, importers, retailers, distributors, and even sole-traders who run a market stall on the weekend.

With such a broad range of public liability insurance companies and cover available in the market, it’s vital to ensure that you purchase a policy that makes sense for your business.

“The sneaker blowout wiped $2 billion off Nike’s market value overnight and raised serious questions over who would be to blame if he was seriously injured as a result.”


How to help ensure you are covered with your product liability insurance

If you’re not careful, it’s easy to take out a product liability insurance policy that won’t actually cover your exposures.

That’s because policies may have exclusions around design defects, faulty workmanship, property damage, importation, compliance with Australian standards, repair and replacement costs, penalties and fines, or contractual liability.

Your product liability insurance may also be voided if you make significant changes to your product without informing your insurer.

For these reasons, it’s important to deal with a product liability insurance broker who knows your business and your product intimately.

That way they can help you find the right insurance solution with the necessary policy extensions, including small business product liability.

The right product liability insurance policy for your business

From the 2019 strawberry needle sabotage scandal to the ongoing Takata global airbag recall affecting one in four Australian vehicles, there is no shortage of product recall horror stories.

Now, typically, if a business has to recall a product they face a long list of costs: notifying the public, physically retrieving the product, refunding customers or replacing the product and hiring crisis management experts. That’s not to mention the interruption to business as usual and lasting brand damage.

And while you may assume these costs would be covered by your product liability insurance, that’s not always the case.

So, if you sell, assemble, supply or import a product – or part – that could be recalled, it’s important to speak to a product liability insurance broker about an insurance solution that protects your business from the significant financial and reputational costs associated with a product recall.

Part of the bigger insurance picture

Product liability insurance is just one form of liability you should consider protecting your business against.

Depending on the nature of your business, you may also face public liability, professional liability and management liability issues.

They can help develop an insurance package that suits your wants, needs and your budget.

Important disclaimer – Steadfast Group Limited ABN 98 073 659 677, its subsidiaries and its associates.

The views expressed are those of the author only and do not necessarily reflect those of Steadfast.

This magazine provides information rather than financial product or other advice. The content of this magazine, including any information contained on it, has been prepared without taking into account your objectives, financial situation or needs. You should consider the appropriateness of the information, taking these matters into account, before you act on any information. In particular, you should review the product disclosure statement for any product that the information relates to it before acquiring the product.  

Information is current as at the date articles are written as specified within them but is subject to change. Steadfast, its subsidiaries and its associates make no representation as to the accuracy or completeness of the information. Various third parties, including Know Risk, have contributed to the production of this content. All information is subject to copyright and may not be reproduced without the prior written consent of Steadfast Group Limited.


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