Haveing asked about a week ago about insurace for a dropship buisness it was surgested that i look into "Product liability insurance" as i will not be handleing the goods for sale. I am now woundering if there is anyone out there who could help me by surgesting any insurance companys who could help me with a policy for "Product liability insurance" please. As i am haveing no look.

Many thanks

Ring CBG Insurance Brokers on 0161 624 3801, ask for Clarissa. She will sort you out with the best deal.

I didn't think you needed product liability insurance unless you were classed as the manufacturer?

Doesn't make sense to me, its not your product, its the manufacturers. If someone bought a Playstation from Virgin Megastores and it exploded, it would be Sony they sue not Virgin. Its only when a retailer knows of a problem and doesn't take all steps possible to prevent/rectify it, or are the ones who caused it, are they liable.

Like a Birdseye ready-meal sold by Tesco, if a batch is found to be contaminated and they inform all retailers, then Tesco doesn't stop sale of it, take the rest off the shelf and announce a prodcut recall informing the public of the risk, they then become liable. However, I doubt in that instance an insurance policy for product liability would pay out, because the reason they are sued is not for the actual product, its their actions regarding the recall and notification.

Maybe someone could enlighten me as to why this is necessary?

The customer can sue either the manufacturer or the retailer. If the manufacturer is based abroad e.g. China it is notoriously difficult for anyone outside of the country to get any compensation.

So it really depends on what you are selling. If it's a big company like Sony you might be OK, but if it's a smaller company only based in China, then you definetly need it.

Personally I would get it anyway, it's not worth the risk for a couple of hundred quid a year.

If you are in the "money trail", you will be named in the suit. Chances of you paying a lot are slim, as you don't have it. But the insurance will cover your legal fees, which can mount up, even if you end up not paying anything to the plaintiff.

Physically handling it has nothing to do with it. You profited from the sale of a defective product, so you will be named in the court filings.

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Originally Posted by ADC

Personally I would get it anyway, it's not worth the risk for a couple of hundred quid a year.

Ok but how exactly does this work. Do they simply issue insurance to you for any product you may sell, I find that hard to believe?
Basically what happens if you have different products in every week?
Or in the scenario of the op, every time the dropshipper adds new products he has to call up the insurance company and give details of each new product to them, and get his premium increased each time (more products = more risk)?

It just seem really odd to me that thats how it works. Why should they be able to decide whether they sue a retailer or a manufacturer?
I mean by that logic, the customer can also sue the wholesaler/distributor since they are the ones who sold faulty goods to the retailer, or the shipping company that brought it across from China because if they didnt, it would not have been on the UK market to start with.

The whole thing just seems ludicrous to me, it really does.
Yes the retailer can be held responsible/sued in certain situations, but they would generally fall outside of what a product liability insurance would cover (you know how they try everything they can to not cover in x situation/for x reason).

Ok fair enough if it cost you £200/£300 year like you say to have full cover for any situation that arises that does not specifically catalogue each individual product (so is a very generalised insurance - to you, the retailer - that covers any product you sell, no exceptions) then maybe it isn't as bad. I just cannot see an insurance company operating like that, as Tesco would pay the same premium as an ebay trader (for example).


And sorry, it turned into a bit of a rant too, it just seems that more and more things are put on the retailers shoulders while wholesalers, distributors, manufacturers don't have to answer to the same. If there is a defective product, it is no more the retailers fault than anyone else's in the chain. Yes someone should be responsible, but it should not always be the retailer (unless its by something they did).
I obviously don't know much about product liability insurance specifically, so I don't mean to come across arrogant or anything. Its just one of those things that ticked me off. I will have to look into this and maybe then it will make more sense to me, I just cant get my head around it at the moment.

Originally Posted by Pete

the insurance will cover your legal fees, which can mount up, even if you end up not paying anything to the plaintiff.

Yes I can see the logic in that. However, I thought the legal fee's would have been covered by your other insurance policies!?

Or are we talking here that the ONLY insurance you have due to dropshipping exclusively is the product liability insurance?

In the US, many retailer type commercial insurance policies DO include product liability. Many will have a "balloon" $1 million or higher rider attached for unspecified products. Like all insurance, they throw your money in a pot and figure the odds are overall in their favor.

In addition, they generally consider this a nuisance sort of thing for a retailer, understanding that the filing attorneys are going for the "deep pockets", not the mom and pop retailer. So, from the start they understand it is more covering legal fees and paperwork, not that Joe Small Business is going to be caring for an infant damaged by a product for the rest of it's life. That's where the manufacturer's insurance kicks in.

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Originally Posted by BondyUK

Ok but how exactly does this work. Do they simply issue insurance to you for any product you may sell, I find that hard to believe?
Basically what happens if you have different products in every week?
Or in the scenario of the op, every time the dropshipper adds new products he has to call up the insurance company and give details of each new product to them, and get his premium increased each time (more products = more risk)?

It just seem really odd to me that thats how it works. Why should they be able to decide whether they sue a retailer or a manufacturer?
I mean by that logic, the customer can also sue the wholesaler/distributor since they are the ones who sold faulty goods to the retailer, or the shipping company that brought it across from China because if they didnt, it would not have been on the UK market to start with.

The whole thing just seems ludicrous to me, it really does.
Yes the retailer can be held responsible/sued in certain situations, but they would generally fall outside of what a product liability insurance would cover (you know how they try everything they can to not cover in x situation/for x reason).

Ok fair enough if it cost you £200/£300 year like you say to have full cover for any situation that arises that does not specifically catalogue each individual product (so is a very generalised insurance - to you, the retailer - that covers any product you sell, no exceptions) then maybe it isn't as bad. I just cannot see an insurance company operating like that, as Tesco would pay the same premium as an ebay trader (for example).


And sorry, it turned into a bit of a rant too, it just seems that more and more things are put on the retailers shoulders while wholesalers, distributors, manufacturers don't have to answer to the same. If there is a defective product, it is no more the retailers fault than anyone else's in the chain. Yes someone should be responsible, but it should not always be the retailer (unless its by something they did).
I obviously don't know much about product liability insurance specifically, so I don't mean to come across arrogant or anything. Its just one of those things that ticked me off. I will have to look into this and maybe then it will make more sense to me, I just cant get my head around it at the moment.

They can only sue the manufacturer (for obviously manufacturing the defective product) and the retailer (for selling them the defective product), they can't sue everyone else who handled the product in between.

You have to tell the insurance company the types of products sell and they will give you a quote. So for example you tell them mp3 players and phones, they will cover you for mp3 players and phones. If you suddenly decided to start importing childrens toys you would have to tell them and there would obviously be a change in the premium. If your a homeworker you will be able to get a policy that covers you for product liability and the stock in your home against fire & theft too.

It also depends on how your business is set up. If you are set up as a sole trader or partnership and you don't get product liability insurance. They can basically sue you for everything you own including your house and future earnings. If your business is set up as a Limited Liability Partnership or Limited Company they can only take what the company has. So if you were sued by someone, you would more than likely have to close the business down but it wouldn't ruin your life.

Originally Posted by ADC

They can only sue the manufacturer (for obviously manufacturing the defective product) and the retailer (for selling them the defective product), they can't sue everyone else who handled the product in between.

You have to tell the insurance company the types of products sell and they will give you a quote. So for example you tell them mp3 players and phones, they will cover you for mp3 players and phones. If you suddenly decided to start importing childrens toys you would have to tell them and there would obviously be a change in the premium. If your a homeworker you will be able to get a policy that covers you for product liability and the stock in your home against fire & theft too.

It also depends on how your business is set up. If you are set up as a sole trader or partnership and you don't get product liability insurance. They can basically sue you for everything you own including your house and future earnings. If your business is set up as a Limited Liability Partnership or Limited Company they can only take what the company has. So if you were sued by someone, you would more than likely have to close the business down but it wouldn't ruin your life.

Yes the old sole trader vs limited company, I understand that.

Surely they cant sue both the retailer and the manufacturer, its one or the other?
So out of interest, would they be separate cases, or would they bring a single case against both parties together?

This has been a real eye opener