PROJECT REPORT ON PRODUCT INSURANCE.

A Project submitted to

University of Mumbai for partial completion of the Degree of

Master of Commerce (M.COM) SEM -IV

( Financial Accounting )

Submitted by :-

Mr.Ajit Murugeshan Nadar

ROLL NO :-05

Under The Guidance of Prof :-

Mrs. Sunita Sonar

Jan Seva Sangh’s

Shri Ram College

Of Commerce, Arts & Science

Datta Mandir road Nahur , Subhash Nagar Bhandup (w) Mumbai

400078

ACADEMIC YEAR :- 2022-23

 ACKNOWLEGMENT

To list who all have helped me is difficult because they are so numerous and the depth is so
enormous. I would like to acknowledge the following as being idealistic channels and fresh
dimensions in the completion of this project.

I take this opportunity to thank the University of Mumbai for giving me chance to do this
project. I would like to thank my Principal, Dr.Sunita Yadav for providing the necessary
facilities required for completion of this project. I take this opportunity to thank our for their
moral support and guidance. I would also like to express my sincere gratitude towards my
project guide Prof. Sunita Sonar whose guidance and care made the project successful.

I would like to thank my College Library, for having provided various reference books and

magazines related to my project.

Lastly, I would like to thank each person who directly or indirectly helped me in the

completion of the project especially who supported me throughout my project.

 Certificate

This is to certify that Mr. AJIT MURUGESHAN NADAR has worked and daty completed
her Project work for the degree of Master in Commerce under the faculty of Commerce in the
subject of M.Ccom (Accountancy) and (her/his) project is entitled, " A STUDY OF
PRODUCT INSURANCE " under my supervision.

I further certify that the entire work has been done by the learner under my guidance and that
no part of it has been submitted previously for any Degree or Diploma of any University.

It is her/his own work and facts reported by her personal findings and investigations

Dr. Sunita Yadav External Examiner Prof. Sunita Sonar

(Principal) (Project Guide)

Date of Submission :
 DECLARATION

I AJIT MURUGESHAN NADAR , here by, declare that the work embodied in this project work titled "PRODUCT
INSURANCE " forms my own contribution to the research work carried out under the guidance of Prof. Sunita
Sonar is a result of my own research work and has not been previously submitted to any other University for any
other Degree/Diploma to this or any other University.

Where ever reference has been made to previous works of others, it has been clearly indicated as such and included in
the bibliography.

1, here by further declare that all information of this document has been obtained and presented in accordance with
academic rules and ethical conduct

AJIT MURUGESHAN NADAR

 INDEX

Sr. No. Topic Page no.

1 Introduction 1-2

2 History of Product Insurance 3-4

3 Current State of Law 5

4 Importance of Product Liability 6

5 Benefits of Product Liability 7-8

6 Features of Product Liability 9-10

7 Product Liability v/s General Liability 11

8 Product Liability Coverage Highlight 12

9 How to Protect Business? 13

10 Scope 14

11 Development 18-19

12 Product Liability Insurance Process 22-23

13 Insurance Certificate 24

14 Product Liability Policy 26-36

15 Consumer Protection Act 1986 37-51

16 Findings 52

17 Case Study 53

18 Conclusion 54

19 Questionnare 55

20 Reference/Bibliography 56
 Introduction
The insurance industry has both economic and social purpose and relevance. It provides social security and
promotes individual welfare. Generally, the insurance companies are big investors in long gestation infrastructure
development projects. Insurance reduces risk and helps to raise productivity in the economy.
Insurance is a device for the transfer of risks of individual entities to an insurer who agrees for a consideration
(called premium) to assume to a specified extent losses suffered by the insured. Insurance covers insurable risks
and the probability of insurable risk can be determined or forecasted for example risk related to life, property,
riots, thefts are insurable.
The insurance companies are also financial intermediaries as they collect and invest large amount of premiums
in government projects. They offer protection to the investors, provide means for accumulating savings and
channelize funds to the government and other sectors. They are a contractual saving agency which receives mostly
without fail, steady inflow of funds in the form of premiums or regular contribution to pension plans. They are
also in a position to predict, relatively accurately, when and what amounts of insurance or pension benefits have
to be paid. Further, liabilities in most of the cases are long term liabilities, for many life policies are held for 30
or 40 or even more years. As a result, the liquidity is not a problem for them and their major activity is in the
field of long-term investments. Since the offered life-cover to the investors, the guaranteed rate of return specified
in insurance policies is relatively low. Therefore, they do not need to seek high rates of return on their investments.
As a combined result of all these factors, the investments of insurance companies have been largely in government
bonds, mortgages, state and local government clams and corporate bonds.
The insurance companies are active in the following fields among other life, health and general and they have
begun to operate the pension schemes and mutual funds also. Insurance business consists of spreading risks over
time and sharing them between persons and organisations. The major part of insurance business is life insurance,
the operations of which depend on the laws of mortality. Pension business is a specialised form of assurance
provides social security to old aged population. Any property human or animal life or any event that may lead to
the loss of a legal right, including value or the creation of legal liabilities is referred to as the subject matter of
insurance. Insurance is an event that may or may not occur.
Definition of an Insurance Contract as per IFRS-4: The International Accounting Standards Boards (IASB) while
circulating the International Financial Reporting Standards for insurance (IFRS-4) in March 2004, prescribing
insurance accounting and disclosure, define a contract of insurance as ―a contract under which one party (that is
insurer) accept significant insurance risk from another party (the policyholder) by agreeing to compensate the
policyholder if a specified, uncertain future event (insured event) adversely affect the policyholder.

1
Product Liability Insurance Explained
Product liability insurance protects the business from claims related to the manufacture or sale of products, food,
medicines or other goods to the public. It covers the manufacturer's or seller's liability for losses or injuries to a
buyer, user or bystander caused by a defect or malfunction of the product, and, in some instances, a defective
design
or a failure to warn. When it is part of a commercial general liability policy, the coverage is sometimes called
products-completed operations insurance.
To understand the need for this coverage it is critical to understand the potential liability. There are generally
three
types of products "claims" a company may face:
Manufacturing or Production Flaws- A claim that some part of the production process created an unreasonably
unsafe defect in the resulting product. Recent claims against Chinese manufacturers regarding the presence of
dangerous chemicals in their products are an example of this type of claim.
Design Defect- A claim that the design of the product is inherently unsafe. The most memorable example is the
series of Pinto car cases against Ford in the 1970's.
Defective Warnings or Instructions- The claim that the product was not properly labelled or had insufficient
warnings for the consumer to understand the risk. The McDonald's "coffee case" is an example.
The damages awarded in these claims include medical costs, compensatory damages, economic damages, and, in
some instances, attorneys' fees, costs and punitive damages. Product liability claims can and do put businesses
out of
business - just ask any of the officers from any asbestos manufacturer.
If your company provides any products to the consuming public, then your company needs product liability or
completed-operations coverage. In most cases, some form of this coverage will be present in the standard
commercial
general liability or business owners' policy. You will need to confirm this with your insurance professional. You
will
want to have a clear understanding of what is covered (for example, some policies will cover economic damages,
but
not punitive or statutory damages).
Finally, the premiums on such policies are based upon the type of product, volume of sales, and the role of the
insured in the process. Thus, underreporting the volume of sales may seem like a good way to lower premiums
or the
idea may be to insure only a part of the sales. Don't under report or try to insure less than the actual amount of
sales.
This is because there are usually substantial underinsurance penalties applied when the insured underinsures. On
the
other hand, you will want to make absolutely sure that your products are properly identified. For example, if you
supply step stools, you do not want them categorized as ladders. Ladders will have a much higher premium
because of the risk potential.

2
Why Products-Liability Law Is Important

Products liability describes a type of claim, not a separate theory of liability. Products liability has strong
emotional overtones ranging from the prolitigation position of consumer advocates to the conservative
perspective of the manufacturers.

History of Products-Liability Insurance Law

The theory of caveat emptor—let the buyer beware—that pretty much governed consumer law from the early
eighteenth century until the early twentieth century made some sense. A horse-drawn buggy is a fairly simple
device: its workings are apparent; a person of average experience in the 1870s would know whether it was
constructed well and made of the proper woods. Most foodstuffs 150 years ago were grown at home and ―put up‖
in the home kitchen or bought in bulk from a local grocer, subject to inspection and sampling; people made home
remedies for coughs and colds and made many of their own clothes. Houses and furnishings were built of wood,
stone, glass, and plaster—familiar substances. Entertainment was a book or a piano. The state of technology was
such that the things consumed were, for the most part, comprehensible and—very important—mostly locally
made, which meant that the consumer who suffered damages from a defective product could confront the
product‘s maker directly. Local reputation is a powerful influence on behaviour.

The free enterprise system confers great benefits, and no one can deny that: materialistically, compare the image
sketched in the previous paragraph with circumstances today. But those benefits come with a cost, and the
fundamental political issue always is who has to pay. Consider the following famous passage from Upton
Sinclair‘s great novel The Jungle. It appeared in 1906. He wrote it to inspire labour reform; to his dismay, the
public outrage focused instead on consumer protection reform. Here is his description of the sausage-making
process in a big Chicago meatpacking plant:

There was never the least attention paid to what was cut up for sausage; there would come all the way back from
Europe old sausage that had been rejected, and that was moldy and white—it would be dosed with borax and
glycerine, and dumped into the hoppers, and made over again for home consumption. There would be meat that
had tumbled out on the floor, in the dirt and sawdust, where the workers had tramped and spit uncounted billions
of consumption germs. There would be meat stored in great piles in rooms; and the water from leaky roofs would
drip over it, and thousands of rats would race about on it. It was too dark in these storage places to see well, but
a man could run his hand over these piles of meat and sweep off handfuls of the dried dung of rats. These rats
were nuisances, and the packers would put poisoned bread out for them; they would die, and then rats, bread, and
meat would go into the hoppers together. This is no fairy story and no joke; the meat would be shovelled into
carts, and the man who did the shovelling would not trouble to lift out a rat even when he saw one—there were
things that went into the sausage in comparison with which a poisoned rat was a tidbit. There was no place for
the men to wash their hands before they ate their dinner, and so they made a practice of washing them in the
water that was to be ladled into the sausage. There were the butt-ends of smoked meat, and the scraps of corned
beef, and all the odds and ends of the waste of the plants, that would be dumped into old barrels in the cellar and
left there.

Under the system of rigid economy which the packers enforced, there were some jobs that it only paid to do once
in a long time, and among these was the cleaning out of the waste barrels. Every spring they did it; and in the
barrels would be dirt and rust and old nails and stale water—and cartload after cartload of it would be taken up
and dumped into the hoppers with fresh meat, and sent out to the public‘s breakfast. Some of it they would make

3
into ―smoked‖ sausage—but as the smoking took time, and was therefore expensive, they would call upon their
chemistry department, and preserve it with borax and colour it with gelatine to make it brown. All of their sausage
came out of the same bowl, but when they came to wrap it they would stamp some of it ―special,‖ and for this
they would charge two cents more a pound. Upton Sinclair, The Jungle (New York: Signet Classic, 1963), 136.

It became clear from Sinclair‘s exposé that associated with the marvels of then-modern meatpacking and
distribution methods was food poisoning: a true cost became apparent. When the true cost of some money-making
enterprise (e.g., cigarettes) becomes inescapably apparent, there are two possibilities. First, the legislature can in
some way mandate that the manufacturer itself pay the cost; with the meatpacking plants, that would be the
imposition of sanitary food-processing standards. Typically, Congress creates an administrative agency and gives
the agency some marching orders, and then the agency crafts regulations dictating as many industry-wide reform
measures as are politically possible. Second, the people who incur damages from the product (1) suffer and die
or (2) access the machinery of the legal system and sue the manufacturer. If plaintiffs win enough lawsuits, the
manufacturer‘s insurance company raises rates, forcing reform (as with high-powered muscle cars in the 1970s);
the business goes bankrupt; or the legislature is pressured to act, either for the consumer or for the manufacturer.

If the industry has enough clout to blunt—by various means—a robust pro consumer legislative response so that
government regulation is too lax to prevent harm, recourse is had through the legal system. Thus for all the talk
about the need for tort reform (discussed later in this chapter), the courts play a vital role in policing the free
enterprise system by adjudicating how the true costs of modern consumer culture are allocated.

Obviously the situation has improved enormously in a century, but one does not have to look very far to find
terrible problems today. Consider the following, which occurred in 2009–10:

 In the United States, Toyota recalled 412,000 passenger cars, mostly the Avalon model, for steering
problems that reportedly led to three accidents.
 Portable baby recliners that are supposed to help fussy babies sleep better were recalled after the death of
an infant: the Consumer Product Safety Commission announced the recall of 30,000 Nap Nanny recliners
made by Baby Matters of Berwyn, Pennsylvania.
 More than 70,000 children and teens go to the emergency room each year for injuries and complications
from medical devices. Contact lenses are the leading culprit; the first detailed national estimate suggests.
 Smith and Noble recalled 1.3 million Roman shades and roller shades after a child was nearly strangled:
The Consumer Product Safety Commission says a five-year-old boy in Tacoma, Washington, was
entangled in the cord of a roller shade in May 2009.FindLaw, AP reports.
 The Consumer Product Safety Commission reported that 4,521 people were killed in the United States in
consumer-product-related incidences in 2009, and millions of people visited hospital emergency rooms
from consumer-product-related injuries.
 Reports about the possibility that cell-phone use causes brain cancer continue to be hotly debated. Critics
suggest that the studies minimizing the risk were paid for by cell-phone manufacturers.Matt Hamblen,
―New Study Warns of Cell Phone Dangers,‖ Computerworld US, August 9, 2009.

Products liability can also be a life-or-death matter from the manufacturer‘s perspective. In 2009, Bloomberg
BusinessWeek reported that the costs of product safety for manufacturing firms can be enormous: ―Peanut Corp.,
based in Lynchberg, Va., has been driven into bankruptcy since health officials linked tainted peanuts to more
than 600 illnesses and nine deaths. Mattel said the first of several toy recalls it announced in 2007 cut its quarterly
operating income by $30 million. Earlier this decade, Ford Motor spent roughly $3 billion replacing 10.6 million
potentially defective Firestone tires. ―Michael Orey, ―Taking on Toy Safety,‖ BusinessWeek, March 6, 2009,

4
accessed March 1, 2011, Businesses complain, with good reason, about the expenses associated with products-
liability problems.

Current State of the Law

Although the debate has been heated and at times simplistic, the problem of products liability is complex and
most of us regard it with a high degree of ambivalence. We are all consumers, after all, who profit greatly from
living in an industrial society. we examine the legal theories that underlie products-liability cases that developed
rapidly in the twentieth century to address the problems of product-caused damages and injuries in an industrial
society.

In the typical products-liability case, three legal theories are asserted—a contract theory and two tort theories.
The contract theory is warranty, governed by the UCC, and the two tort theories are negligence and strict products
liability, governed by the common law.

5
Importance of Product Insurance: -
If you are a producer or developer of consumer goods having an appropriate level of insurance protection in place
is very important. One of the most important types of insurance to have his product liability insurance. Product
liability insurance can provide him with a number of different types of production.

Product Causes Personal Injury

The most common benefit of having a product liability insurance policy is that it will protect against personal
injury. If someone is injured while using your product, the insurance policy will cover any costs that will rise out
of a lawsuit or settlement negotiation.

Toxicity Protection

When developing a product, you will take all steps necessary to ensure it is made with healthy materials.
However, you only have a limited level of control of the quality of the materials you use. If you happen to use
toxic materials that get people sick the product liability insurance policy will protect against any related lawsuit.

Food-borne Illness

If you happen to make a food or other edible product, you will likely need to have additional product liability
insurance policies. For those that create food products, having one that protects against food related illnesses is
very important. This can provide a level of liability protection against any number of potential food related health
issues that can arise from consumption.

Bystander Injury

While it is important that the user of the product is covered by the liability insurance policy, you also want to
make sure that the bystanders are covered as well. If the product happens to work negatively and people around
the product are injured by it, and he lawsuit that is related to your product will be covered by the liability insurance
policy.

Property Damage

The property damage component of the property liability insurance policy will be very similar to the bystander
coverage. If the product malfunctions in a home or place of business, it could cause damage to the location. In
many situations, the owner of the property may try to sue the product developer to get reimbursed for costs. The
insurance policy will cover against this and any related legal costs you have.

In conclusion, if you are a producer or a developer of consumer goods, having an appropriate level of insurance
protection is very important. One of the most important types of insurance do you have his product liability
insurance. This type of insurance protection can provide you with a range of different benefits.

6
Benefits from Product Liability Insurance to Business: -
Product liability insurance protects a company against claims or suits arising from the company's products,
whether they were made by the company or sold by them. This form of insurance covers a manufacturer's or
seller's liability for bodily injury or property damage sustained by a third party due to a product's defect or
malfunction. The product may be virtually any type of good sold to businesses or the public, like machines, food,
medicines, and clothing. The injured third party may be a buyer or user of the product or even a bystander.

Types of Claims
Product liability claims are typically based on one of the following:

Manufacturing or Production Flaw: In these instances, the injured third party alleges that there was a hazardous
defect in the product that was a result in some face of its manufacturing. For example, Steve purchases a table
saw at a hardware store. Steve is injured when the blade guard flies off the saw and sues the manufacturer,
claiming that the guard was improperly installed when the saw was manufactured. The manufacturing flaw made
the saw unreasonably dangerous.

Design Defect: Here it is alleged that the product's design has been inherently unsafe since its design phase. For
example, Steve from the previous example sues the manufacturer on the basis that the saw was improperly
designed. He contends that when the manufacturer designed the saw, the company failed to ensure that the guard
would remain firmly in place.

Defective Warnings or Instructions: Here, the injured party claims that the seller failed to provide adequate
instructions on the proper use of the product, or that the seller failed to warn buyers of the product's risks. For
example, Bill buys paint thinner at a home store and then becomes ill while using the product in a windowless
room. He later sues the manufacturer for failing to warn him that paint thinner should not be used in an enclosed
environment.

Strict Liability: A manufacturer or seller may be sued on the basis of strict liability, which is a liability in the
absence of negligence. Rather than being based on fault, an injured plaintiff may win a product liability suit
against a manufacturer or seller by proving all of the following:

 The product contained a defect that was dangerous.

 The product injured the plaintiff.
 The injury occurred when the plaintiff was using the product as it was intended to be used. For instance,
the plaintiff was using a table saw to cut wood, not his hair.
 No substantial changes were made to the product after it left the seller. For instance, the buyer didn't
replace the blade guard with a homemade one.

Courts began to apply the concept of strict liability to products in the 1960s and 1970s, determining that the costs
of injuries from defective products should be borne by the companies responsible for the defects, not by the
injured users. They also reasoned that manufacturers put products into the marketplace, so they should bear the
risks that the products are defective.

7
While most product liability suits are filed against manufacturers, some are filed against the vendors of the
product, including retailers, wholesalers, distributors, and resellers. A seller may be held liable for an injury to a
product buyer if the seller helped market the product to the consumer.

Whether a seller will be held strictly liable for product defects varies from state to state. Many states limit a
seller's liability for product-related injuries unless the seller altered the product was involved in its design or knew
it was defective. If a seller that is merely a "pass-through," and the distributor is sued for product liability, the
seller can seek recovery for the costs of the suit from the manufacturer.

Damages

Plaintiffs in product liability suits may receive compensatory damages, including payment for medical expenses,
loss of income, and pain and suffering. Plaintiffs may also be awarded punitive damages and attorneys' fees. In
some cases, a group of product liability claims may be consolidated into a class action lawsuit. Such a suit may
be feasible when all plaintiffs have suffered similar injuries from the same product.

Insurance Coverage

Product liability is covered under a general liability policy. It is covered in conjunction with liability for work
you have completed. The combined coverage is called products-completed operations liability. This coverage is
included in Coverage A, Bodily Injury, and Property Damage Liability.

Businesses that manufacture potentially hazardous products, such as pharmaceuticals or insecticides, may have
difficulty obtaining product liability coverage from a standard insurer. These kinds of businesses may need to
purchase coverage separately from a specialty insurer. A surplus lines broker can help locate insurers for that
kind of coverage.

Product sellers may be afforded vendors coverage under the manufacturer's liability policy via an endorsement.
The endorsement covers the seller as an additional insured. It protects the seller against suits that arise from
defective products made by the manufacturer.

Product Liability Rates

The rate charged for product liability coverage depends on the nature of the product. Hazardous products are
more expensive to insure than low-hazard products. Your insurer will categorize your business and assign an
appropriate class code. Your product liability premium is calculated by multiplying the rate times your annual
sales and dividing the result by one thousand.

The premium you pay at the beginning of the policy period is usually based on your estimated sales. Your insurer
will adjust your premium when it conducts an annual audit. If your actual sales are less than your projected sales,
you may receive a return premium. If your actual sales exceed your estimated sales, you may be charged an
additional premium. Note that underreporting your sales at the beginning of your policy is not a good strategy
for lowering your premium. This tactic may result in a substantial additional premium charge when your policy
is audited.

8
 Features and Benefits of Product Liability Insurance:
Cover
The product liability insurance covers any legal liabilities to third party arising out of injury or harm due to a
product sold by a business.
Add on Cover
This policy can also be extended to cover vendors. The add-on cover is called Limited Vendor‘s Liability. You
can get cover for liability arising out of sales and distribution of the insured product by named or unnamed
vendors.
Eligibility
This policy can be availed by product manufacturers, distributors, retailers and wholesalers. This is regardless of
the fact whether the product that is insured is the final product or just a part of the final product. Some insurers
also extend this policy to the Export Community, which is legally bound to take Product Liability Insurance.
Limit of Indemnity
Under the product liability policy, the ―Limit of Indemnity‖ stands for the sum insured. This amount is determined
based on two limits which are set for each accident that occurs during a particular policy period. These are- the
Any One Accident (AOA) Limit and the Any One Year (AOY) Limit. The Any One Accident (AOA) Limit is
the maximum sum payable for an accident, based on the nature of the product insured, the number of people
affected, the type of damage, etc.
Policy Cover
The product liability insurance covers any legal liabilities to third party arising out of injury or harm due to a
product sold by a business. It covers the following:
 Bodily injury, illness or accidental death to a third party
 Accidental damage to third party property.
Product
Any product can be insured under product liability insurance. The liability may arise out of factors such as:
 Product defect which causes injury, loss, harm or damage to a third party or his/her property
 Packaging defect which compromises the safety of the product and causes harm to the third party.
 Improper use of the product, absence of warning labels/ precautions, etc. which affects the performance or
quality of the product.

List of Companies Offering Product Liability Insurance Policy:

 The New India Assurance Co. Ltd. – The product liability insurance policy provided by New India Assurance
Company Limited covers any legal liability arising out of accidental injury, illness or death to a third party or
damage to third party property, as a consequence of using the product manufactured and sold by the insured.
The cover includes the defense costs as well.
 Tata AIG Insurance – The product liability insurance policy from Tata AIG offers coverage on a global
jurisdiction for exports. It also provides other additional benefits such as flexibility to add the vendor or buyer
as an additional insured under the policy, covers defense costs, internationally accepted policy wordings and
claims format, and so on.
 HDFC ERGO - HDFC ERGO‘s product Liability Insurance policy is extended to product manufacturers to
protect them against legal liabilities. The cover includes cost of legally defending the insured. Other benefits

9
 offered under this policy are globally accepted policy cover, Limited Vendor‘s Liability add-on cover for
named vendors, etc.
 Bharti AXA General Insurance - Bharti AXA General Insurance offers the Commercial General Liability
insurance policy which includes product liability cover as well as public liability cover. This policy is extended
to Indian companies that operate globally or have international associates or partners and also to foreign
companies that operate in India. It provides comprehensive coverage against damage to third party property,
injury or harm to third party, advertising/ personal injury and also covers medical bills associated with the
incident. The Commercial General Liability policy does not cover product recall, omissions and errors, war
related damages, employer‘s liability, damage to the insured‘s product/ property, pollution liability, etc.
 Bajaj Allianz – The Bajaj Allianz product liability insurance policy covers any legal liability arising out of
accidental injury, illness or death to a third party or damage to third party property, as a consequence of using
the product manufactured and sold by the insured. The sum insured can be determined based on the worst case
scenario of the maximum number of people that might be affected by the use of the product. The sum insured
also covers the legal costs involved. This policy does not cover any costs which are incurred in recall of
products, repairing the products, non-compliance with statutory laws, loss of goodwill, risks related to war,
fines and penalties, contractual liability, failure of the product to meet intended needs, product guarantee, etc.
 United India Insurance Company – The product liability insurance policy offered by United India Insurance
Company offers legal protection against claims raised against the insured due to the manufacture and sale of
defective or harmful products. All expenses involved in defending the claim for compensation is reimbursed
by the insurance provider. Any compensation to be paid to the affected third party is covered under this policy,
if the event falls within the scope of the policy document.

10
Products Liability versus General Liability

In reality, products liability (or product liability) is a component of general liability insurance. Unless otherwise
excluded, a standard ISO general liability policy includes an aggregate coverage limit for ―products and
completed operations―. This limit is separate from the ―general aggregate‖ that covers claims other than
products/completed operations.

For a manufacturing business, products liability is priced based on the type of goods being produced (the potential
for bodily injury or property damage claims) and the estimated gross revenue derived from the sale of the goods.
Many insurance carriers that offer products liability coverage have minimum premiums – often between $5,000
and $10,000 per year – depending on the type of goods being manufactured.

General liability also provides coverage for the premises and operations of a business. This can include the
factory, warehouse, and office space needed by the business. Claims arising from the premises might include a
slip and fall injury or damage caused by an employee at a customer location.

Products liability provides coverage for bodily injury and property damage that result from the use of your
product. It is important to note that products liability does not provide coverage for claims of defective or faulty
design alone unless that defect causes injury or damage. Products liability coverage also does not address the
expense of a mandatory product recall. However, there are other types of liability insurance – such as professional
liability and products recall coverage – that can be purchased separately.

The answer to the question of products liability versus general liability, in summary, is this: general liability
provides coverage for your operations, premises (location), completed operations (such as construction work)
and your products.

What is Product Liability Insurance?

Small businesses selling or manufacturing products should be protected in the event of a person becoming injured
as a result of using their product. Here comes product liability insurance that protects your company against
lawsuits from product-related injury or accidents.
In product liability insurance terms, a product is any physical item that is sold or given away. Products must be
"fit for purpose". Under the Article 2 of Uniform Commercial Code § 2-314 and Tort Law you're legally
responsible for any damage or injury that a product you supply may cause. If you supply a faulty product,
claimants may try to claim from you first, even if you did not manufacture it. You'll be liable for compensation
claims if:
 your business' name is on the product - i.e. the manufacturer made it for your brand
 your business repairs, refurbishes or changes the product
 you imported it from outside the United States
 you cannot clearly identify the manufacturer
- the manufacturer has gone out of business
 Otherwise, the manufacturer is liable - or the processor, where the product involves parts from multiple
manufacturers.
 However, you must also:
- show that the products were faulty when supplied to you

11
 - show that you gave consumers adequate safety instructions and warnings about misuse
- show that you included terms for return of faulty goods to the manufacturer or processor in any
sales contract you issued to the consumer
make sure that your supply contract with the manufacturer or processor covers product safety, quality control and
product returns
- have good quality control and record-keeping systems

Who needs to carry Product Liability Insurance?

Although the ultimate responsibility for injury or damage in products liability cases most frequently rests with
the manufacturer, liability may also be imposed upon a retailer, wholesaler, middleman, bailor, lessor, and other
party wholly outside the manufacturing and distributing process. In many cases you are not be at fault of selling
a defective product; however, when the claim is brought you need to defend yourself in court. Nowadays,
litigation costs are extremely high, so paying it out of your own pocket might affect your business dramatically.
Here when product liability insurance comes to play. It will pay for the defense cost up to the amount specified
in the policy, your business is not affected financially, and you can continue your growth. What if the products I
sell are manufactured overseas? Imagine how many Chinese manufacturers are actually subject to process from
a United States court today and how likely is it that a claimant can enforce a judgment against them? The answer
is none and not likely. This puts a very real risk of liability upon the supplier - the local toy store, convenience
store, wholesale supplier, distributor, etc... Product liability insurance covers against this kind of risk.

Product Liability Coverage Highlights

Depending on the insurance company Product Liability Insurance policy usually includes the following coverage:
Bodily Injury: Physical injury to the person of a Third Party. This includes sickness, disease, pain and suffering,
emotional distress, loss of income and even death.
Property Damage: Damage or destruction including loss of use of a Third Party's property. Reduction in value
is the measure of Property Damage.
Medical Payments: This coverage reimburses the insured and others up to a certain limit for medical or funeral
expenses as a result of bodily injury or death by accident
Fire Legal Liability: Limited coverage for damage to a premise caused by a fire for which you may be held
liable.
Personal/Advertising Injury: Covers you for certain offenses you or your employees commit in the course of
your business, such as libel, slander, disparagement, or copyright infringement in your advertisements.

12
How to Protect my Business?
You can protect yourself in several ways.
First, you need to have a product liability insurance.
Second, if you do not manufacture the products you sell you need to collect the certificate of insurance from the
actual manufacture where you are named as an additional insured. This can help to lower the amount of money
your product liability insurance company will pay out on your behalf.
Third test the product to catch when the products were faulty when supplied to you.
Give consumers adequate safety instructions and warnings about misuse Included terms for return of faulty goods
to the manufacturer or processor in any sales contract you issued to the consumer.
Retailers, wholesalers, distributors, and importers have to make sure that your supply contract with the
manufacturer or processor covers product safety, quality control and product returns. Have good quality control
and record-keeping systems.
Finally, be prepared for product recall. When possible document all sales, shipments, complaints. Be product
recall ready

Product Liability Insurance Policy

This policy covers all sums (inclusive of defence costs) which the insured becomes legally liable to pay as
damages as a consequence.
Points to be noted: -
This policy covers all sums (inclusive of defence costs) which the insured becomes legally liable to pay as
damages as a consequence of:
a. accidental death/ bodily injury or disease to any third party.
b. 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 premises.
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

13
Scope
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 product.
The policy covers the sales turnover of the company‐ both domestic and/or exports.
The policy is on 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.

here are many different things that can cause a product issue, but 3 of the common reasons are:

Design defect: This issue will be present in a product before it‘s even made.
Manufacturing defect: This issue suggests that something went wrong while the product was being made.
Perhaps it was assembled wrong, or missing an important piece.
Marketing defect: This type of issue has nothing to do with the product itself, but rather how it was marketed to
the customer. Incorrect labelling, incorrect safety warnings (or lack thereof) or insufficient instructions are
common marketing defects.

The right product liability policy will help protect your business from legal costs if you‘re found responsible for
a product causing bodily injury or property damage to a 3rd party.

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 Jurisdiction Clause.
The policy can also be extended to cover Limited Vendors Liability for named or unnamed vendors. Limited
vendor‘s 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 manufacturers
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:

14
a. 1:1
b. 1:2
c. 1:3
d. 1:4
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.

Products Liability Overview manufacturing or selling – we are all liable

―What exactly is Products Liability and will I be affected because I am the sourcing agent only? I did not
manufacture this product‖

Products Liability – by definition manufacturing or selling – we are all liable

 ―Product Liability‖ is frequently defined as the liability of a manufacturer, seller or other entity in the chain of
product‘s distribution, for personal injury, property damage or economic loss caused by the sale or use of a
product.
• The term ―product‖ is not confined to the finished product alone. Ancillary items that affect consumer
expectations or product safety may be considered part of the product.
• Product liability is not confined to manufacturers of final products, but rather affects all entities within the
chain of manufacture and distribution. A product liability lawsuit can be brought against not only the
manufacturers of products and their component parts, but various entities involved with the marketing,
distribution and application of the product. For example, distributors, dealers, representatives and retailers.
For example, distributors, dealers, representatives and retailers.

15
Products Liability Overview who is liable?
Products Liability is the area of law in which;

Manufacturer Exporter/ Seller Customers

Distributors/Others
Sourcing Agent/Suppiler Importer/Retailer/Buyer

who make products available to the public are held responsible for the injuries those products caused.

16
Products Liability

“Why is Products Liability a contractual requirement in the US? I always see this in the
contractual agreement from my buyer”

Why do clients seek Products Liability cover?

1) Protection against covers 3rd party claimants‘ damages for
 Bodily Injury;
 Property Damage; and
 Investigation and defense

2) Contract requirement with Buyers/ Vendors.

17
What benefits do the clients get? Meeting needs of both buyer and suppliers

Protect investments &

Safeguard against high
fulfill vendor's
cost for actions
requirements

Products
Liability

Look after parties'

Transfers risks at
interests by claims
affordable premium
experts WW

DEVELOPMENT: -
In Asia, generally, the driving force behind the development of the product liability law is the increasing
awareness of consumer rights propelled by the development and the realisation by governmental bodies of the
need to protect consumer against product manufacturers. However, the different pace of economic development
within Asia makes it practically impossible to expect homogeneity in the region. For example , many Asian
countries such as Hong Kong, Srilanka and Singapore do not have specific product liability legislation, but
generally subsume such protection under the principle of common law or general consumer protection legislation.
On the other hand, countries like Japan and Korean have enacted specific product liability legislation.
One of the key inspiration behind product liability legislations is the European Community‘s Product Liability
Directive. The central tenor of the EC directive was introduction of the strict liability regime for defective
products. With the increasing economic development, given that manufacturer have greater resources to
anticipate, prevent and investigate product defects than consumer, the introduction of the strict liability regime
was inevitable. It was thought that the strict liability regime conferred better protection to victims and increase
the safety standards of products.
Countries such as Japan, India, China and Korea have identified with the underlying rationale of the EC Directive
and thus followed suits. Brief summary of the product liability landscape of the aforesaid countries are set out
below.

18
 a) Japan‘s Product Liability Law (―PL Law‖) which was enacted in 1994 imposes strict liability on
defendants for death, injury and damaged caused by a defective product manufactured, processes,
imported or represented as such by the defendant. A series of cases resulting from a defective food or
drugs was also the leading reason for introducing a new legislation regulating product liability and
consumer safety. Japan has even taken it further to introduce a positive duty on suppliers of any consumers
good to notify the government of any serious product-related accident way of an amendment in 2006 to
the Consumer Product Safety Law.
b) The Bhopal disaster in India, considered as the worst industrial disaster in the world, drew India‘s attention
to the need to examine and reform law relating liability for unsafe production and production processes.
The increasing realization of helplessness of the consumers caused the enactment of Consumer Protection
Act of India in 1986.
c) In Korea, the consumer standard act was enacted in 2006 and was amended the 3 times in 2008. It regulates
manufacturing safety, and provides for provision regarding consumer rights, obligations of manufacturers
and retailers as well as the role of the government in regulating consumer protection. The Korean
Government also has policies facilating policies recall with a set of guidelines instituting voluntary and
mandatory product recalls.
ON the other hand, there remain many countries that have not enacted specific product liability laws. For
example, there is no general statutory provision regulating the sale of defective products in Hong Kong
despite recommendations being made in the Law Reform Commissioner Paper on Civil Liability for
Unsafe Products (issued in 1998). Nor is there statutory enactment in Singapore that creates a
comprehensive regime for product liability, though there are specific statutes that govern particular areas
of law where product liability issues may arise. Like Hong Kong product liability in Singapore is largely
based on the common law. This is supplemented by the creation of the various organization such as the
Hong Kong Consumer Council or the Consumers Association of Singapore (―CASE‖) Both provide a
complaint system in which they may try and mediate between the parties, but do not have judicial or
quasi-judicial powers. In the event that mediation is not successful, the only resources to make a claim
through the court system.

Vietnam Law on Products and Goods Quality: -

Article 10- Obligation of Producers
Article 14-Obligations of exporters
Article 32- Conditions for ensuring exported goods' quality
Article 59- Principles of Compensation
Article 60- Damage to be compensated due to goods' poor quality
Article 61- Compensation liabilities
1. Producers and importers shall pay compensation to sellers or consumers when their goods cause harms to
the latter due to their failure to ensure the goods' quality......
2. Sellers shall pay compensation to purchasers or consumers for damage caused by their failure to ensure the
goods' quality......
Vietnam Law on Protection of Consumer's Interests
Article 21- Obligations of warranty for goods, spare parts, accessories
Article 22- Obligations of revoking products
Article 23- Obligations of compensation for the damage caused by product’s defect
1. Business individual, organization has the obligation to compensate damages caused by their defective
product with regard to lives, health, and assets of consumers, even in case traders do not know or have no fault
in causing defect...

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Three Main Areas of Liability
Negligence
This liability arises where there is a failure on your part to exercise reasonable care in the manufacture of a
product. The injured party may seek to prove that you knew, or should have known that a hazard existed and took
either no action, or insufficient action to minimize or eliminate the risk. Liability in negligence can arise from the
provision of inadequate or misleading instructions, or from failing to explore the consequences of wear & tear
over
the potential "life" of a product.
Breach of Warranty
When a product is sold, there is an implied warranty that the product is "fit and suitable" for the purpose for which
it was manufactured. If the product does not meet this standard, the manufacturer may be liable for the breach of
this warranty.
Strict Liability
This is a concept of automatic responsibility whereby, for instance, a manufacturer or distributor will be liable
for
damages without a claimant having to first prove negligence. This means that a claimant may only have to show
that: -
-What happened was a result of the condition of the product;
-The product's condition was unreasonably hazardous;
-The condition existed when the product left the manufacturer's control
This is the most usual type of claim and it is particularly difficult to contest, because you must prove that your
product was not the cause of the loss or injury, or was not unusually hazardous
Product Liability Insurance
A Passport to Overseas Markets:
Product liability is a major passport for your products penetrating into the
overseas market. Many overseas importers will not approve for products being
sold without product liability insurance for these products. Due to the legal
requirements for product safety are increasingly strict, the importers are nowadays
maintaining requirements for the exporters/suppliers to be responsible for them
products.
Thus, product liability not only provide financial protection but open opportunities
for exporters/suppliers to sell more their products to overseas market as well.
Why we have to accept the failure to secure a goods order or confront a serious
claim with a potentially huge amount of indemnity! Whilst, we can afford the
insurance premium/cost as this cost is not so expensive and controllable

The enactment of specific product liability legislation is not a one-stop solution to addressing all product liability-
related issues. Effective protection still hinges on other factors such as the ease of enforcement of such
legislation, easy consumer access to the justice system and the integrity of such systems.

Effective product liability protection is especially challenging in the developing Asian countries where the level
of awareness and the financial means of the general populace to obtain redress may not be as high as that of the
developed world. This is further compounded by the lack of sophistication of the legal systems (such as under-
developed court systems and out-dated legislation) and the inadequate availability of resources to enforce any
such laws.

20
As a compromise, in view of the limited resources (especially in developing Asian countries), some Asian
countries such as India and Sri Lanka have set up special consumer tribunals to assist in the progression of product
liability protection. Compared to formal litigation, consumer tribunals are preferred as there is speedy and
affordable disposal of cases. Its flexibility may cater especially well to developing countries, particularly due to
a low-entry initiation mode, a simple but rights-based dispute resolution procedure and a quick enforcement of
the outcome. However, judicial or quasi-judicial officers handling these cases tend to be inexperienced with the
handling the judicial process or the evidence put before them, especially by manufacturers or importers in their
defence of their product, something leading to somewhat bizarre decisions. Alternatively, each matter is bounced
around within the processes and hearings (whether substantive or procedural), and decisions or rulings are made
after significant delay. Often there are avenues of appeal to the courts, which in turn causes significant delay and
costs. For example, in India, the definition of what constitutes a ―consumer‖ under the Consumer Protection Act
1986 (―CPA‖) is still uncertain, with two appeals to the Supreme Court of India (that we are aware of) dealing
specifically on this issue. Consequently, the Commissions are set up under the CPA to adjudicate consumer
claims.

On the other hand, the threat of the immense damages compensation resulting from class actions may propel the
speed of development of product liability regime in Asia. Class actions and punitive damages are gaining traction
in Asia (such as in Thailand and Indonesia where legislation recognising class actions have been approved by the
legislature in principle) because it enhances access to justice through the provision of a remedy to those who have
little financial means to seek judicial redress. China‘s Tort Responsibility Law, which took effect on 1 July 2010,
includes the introduction of punitive damages for defective products. Japan has also joined the bandwagon and
introduced a bill to introduce class actions which in the current form would not exclude a class action claim based
on product liability. In May 2012, many years of debate have given rise for Hong Kong Law reform to release
an extensive report on class actions. The reform is more of an opt-out model that would permit product liability
and personal injury claims, but it rejected the adoption of contingency fees or punitive damages and urged the
preservation of the ―loser pays rule‖. The Consumer Protection Act in India also allows the filing of class action
suits by any trade or registered consumer association, any Central or State Government, or a number of consumers
where there is a common interest. As such, it is still an ongoing debate as to the extent to which Asia as a region
will embrace such an action. product liability on a global scale presents new challenges for multinational
manufacturers. IN short, product liability on a global scale presents new challenges for multinational
manufacturers.

Insurance
Another factor that affects the development of product liability is insurance claims. Insurers are generally the
first point of contact when a product liability claim is made. The globalisation of the product supply has
invariably contributed to the rise of global insurance claims. As such the principles behind insurers‘ rights of
subrogation are generally well understood. Insurers who indemnify an insured for a loss thereby become entitled
to claim against the wrong-doer who has caused that loss, i.e. by paying a claim the insurer ―steps into the shoes
―of the insured and takes over any rights it has against the third parties who may be responsible for the loss. It is
an equitable principle that prevents the insured from the retaining the benefit of a double recovery. Generally, in
the automobile sector, a customer may be more inclined to make an insurance claim for any loss or damage
resulting from any defect in the vehicle. Thereafter, it is up to the insurance company to proceed with a
subrogation claim against the manufacturer or reporter. Again, in this regard, we see different trends in different
parts of the Asia Pacific region. We have observed that in jurisdictions such as Japan, Korea and Taiwan, the
insurance companies have been more proactive in seeking compensation against the manufacturer and/or importer
of the products. However, as we move southward, the numbers of subrogation claims are significantly
reduced. This is an interesting phenomenon, especially in countries with more developed legal systems such as
Singapore or Malaysia where we might expect insurance companies to use subrogation to recoup the pay-outs if

21
there is good cause to do so. If defective products are simply covered by insurance, there is less pressure on the
manufactures to ensure that they continue to place emphasis on the safety of their products.

Product Liability Insurance Process:

22
Product Liability Insurance – Coverage Summary:
This insurance is designed to indemnify the Insured against all sums that the Insured shall
become legally liable to pay as damages consequent upon accidental body injury or illness to
Third Parties and loss of or damage to the property of third parties caused by an alleged defect
of the Insured‘s products arising during the period of insurance and caused in the course of the
insured‘s business.
In addition to paying for the costs and expenses incurred with the written consent of the
insurance company, the policy also covers the cost of defines litigation of such claims.
With particular Exporter's Product Liability Insurance, you are protected against actions brought
to court by a member of the public, or by a retailer or distributor seeking recompensation for
loss, injury or damage caused by your products. The policy is designed around your particular
exporting needs, and it helps you protect your markets by transferring your risk to Insurers at a
known-cost you can budget. You may be covered worldwide against the followings: -
. Legal expenses
· Investigative work necessary to verify the cause of the injury
· Suits brought against you or your company before a court of law
· Suits brought against you under a North American court of law
· Defined product recall expenses (optional cover)
· Additional cover for your Vendors is available

23
Product Liability - Insurance Certificate
POLICY SCHEDULE / INSURANCE CERTIFICATE
Policy No: …..........................
Type of Insurance: PRODUCTS LIABILITY INSURANCE

Insured: The Insured Company and/or their subsidiary companies and/or Vendors/Contractors of
every tier, or for which the Insured has responsibility for providing insurance, as now
existing or as hereinafter may be constituted, and/or other entities named or described in
the policy for their joint and several interests and liabilities.
Additional Insured: To be advised.
Correspondent Address: To be advised.
Business Practice: The Insured Company's business and all other related activities incidental to the Insured‘s
business.
Period of Cover: 12 months from: .................. To: .................. (both dates inclusive).
Scope of Cover: Covering the legal liability of the insured to the third parties for: -
- Bodily Injury to any person
- Loss of or damage to third party‘s property
Occurring during the period of insurance as a result of any defects in or harmful nature of
any goods or products supplied by the insured in connection with the Insured‘s business.
Claim Trigger: Occurrence Basis
Territorial Limit & Jurisdiction: World-wide, including USA/Canada
Limit of Indemnity: US$1,000,000 any one occurrence and
US$2,000,000 in the aggregate any insurance period
Estimated Turnover: For US/Canada Market: US$.......
For domestic Market: US$..............
For other Market: US$ ...................

24
Product Liability Insurance-Commercial Process

Understand the
insuarnce needs
Collate U/W information
(Survey/Application form)
Quating terms
& conditions

Reviews & Finalize Insurace

terms & conditions

Place insurance programme

issue polici documents

25
PRODUCT LIABILITY POLICY
Whereas the Insured named in the Schedule hereto has made a proposal to Future General India Insurance
Company Ltd (hereinafter referred to as the ―Company‖) which is hereby agreed to be the basis of this Policy
and has paid the premium specified in the Schedule, the Company agrees, subject to the following terms,
exclusions, definitions, limitations, and conditions, to indemnify the Insured in terms of this Policy.
Operative Clause:
The Company will indemnify the Insured in excess of the Insured‘s Deductible and subject to the Limit of
Indemnity, against the Insured‘s legal liability (including claimant‘s costs, fees and expenses, and Defence Costs)
to pay Damages for third party civil Claims arising out of Accidental Bodily Injury or Property Damage:
a. caused by the sale or supply of the Insured‘s Products, and

b. solely in the course of the Business, and

c. during the Period of Insurance if notified during the Policy Period by the Insured in accordance with the terms
of this Policy,

Provided that the Company shall not be liable for and no indemnity is available hereunder for:
a) Any liability under the Public Liability Insurance Act 1991, any amendment thereto
or any other statute or law which attaches liability on a no fault basis;
b) any legal liability incurred pursuant to or under any form of legal (including
arbitration) or regulatory proceedings brought in the United States of America or
Canada or outside of the United States of America or Canada by a country applying
the law of the United States of America or Canada, or to seek enforcement or
upholding of a judgment, award or order made in the United States of America or
Canada or pursuant to the law of the United States of America or Canada
1. Definitions

The following words or terms shall have the meaning ascribed to them wherever they appear in this Policy, and
references to the singular or to the masculine shall include references to the plural and references to the male
gender shall include references to the female wherever the context so permits:
1.1) "Bodily Injury" means the death, physical bodily injury, sickness or disease of a

third person.
1.2) "Property Damage" means actual physical damage to tangible material property

belonging to a third person.

1.3) "Pollution" means and includes pollution or contamination by solids, liquids,

gaseous or thermal irritants, contaminants, smoke, vapour, soot, fumes, acids,

alkalis, radioactive and/or nuclear material, chemical or waste materials
(including but not limited to any materials to be recycled, reconditioned or
(reclaimed) or otherwise of atmosphere, water, soil or other tangible material
property.
1.4) "Product" means any tangible material property which has been designed,

specified, formulated, manufactured, constructed, installed, sold, supplied,

distributed, treated, serviced, altered or repaired by or on behalf of the Insured
and which has left his possession, custody or control. This shall not apply to food

26
and beverages supplied by or on behalf of the Insured to his employees as a staff
benefit.
1.5) "Policy Period" means the period between the commencement date and the expiry

date shown in the Schedule.

1.6) "Period of Insurance" means the period between the retroactive date and the

expiry date shown in the Schedule, and if there is no retroactive date then shall
mean the Policy Period.
1.7) "Accident" or "Accidental" means a fortuitous event or circumstance which is

sudden, unexpected and unintentional, external and visible and includes

resultant continuous, intermittent or repeated exposure.
1.8) "Premises" means the place or places named in the Schedule from which the

Insured‘s Business is conducted, and shall be deemed to include pipelines owned

by the Insured that run outside of the Premises for discharging treated effluents
to a disposal point situated within a distance of not more than one kilometre from
the Premises.
1.9) "Policy" means the proposal, the Schedule, this policy document, and any

endorsement attaching to or forming part hereof, either at inception or during the

Period of Insurance.
1.10) "Business" means the business of the Insured specified in the Schedule.

1.11) "Deductible" means the amount stated in the Schedule, which shall be borne by

the Insured in respect of each and every claim made under this Policy and which is also applicable against Defence
Costs. The Company‘s liability to make any payment under this Policy is in excess of the Deductible.
1.12) "Claim" means the receipt by the Insured of any written notice of

demand for compensation or rectification made by or on behalf of a third party

against the Insured, and/or any suit, claim, petition, writ, statement of claim,
claim form, summons, application or other originating legal or arbitral process,
cross-claim, counterclaim or third or similar party notice served upon the
Insured.
All Claims resulting from one and the same event or arising out of the same
cause or event; or to the same fault in design, manufacture, instruction for use
or labelling of Products; or to the supply of the same Products or to Products
showing the same defect; or caused by continuous or repeated exposure to
substantially the same harmful conditions, shall jointly constitute one Claim
under this Policy and as having been made at the time when the first Claim was
made in writing and only one Deductible shall be applicable to such Claim.
There shall, however, be no coverage for notifications made 3 years after the date
of the first Claim in the series.

27
PRODUCTS’ LIABILITY POLICY SCHEDULE
Agency: Account Number
Policy Number
Insured‘s Name:
Postal Address: Postal Code Town
Trade /Business / Occupation
Product Line(s)
Period of Insurance (a) From: To: (both dates inclusive)
And any subsequent period for which the Insured shall pay and the Company shall accept renewal premium.
Renewal Date
Premium KES. T/Levy PCHF S/Duty
Total Premium: KES.
Territorial Limits:
Limit of Indemnity
a. In respect of any one claim KES.
b. In respect of all claims arising out of one event KES.
c. In respect of all claims during the Period of Insurance KES.

Estimated Annual Turnover KES.

Clauses and Endorsements applicable:
Excess
Date of signature of proposal and declaration
Date policy examined :
Signed for and on behalf of
The Insurance Company
Date

CONDITIONS
1. Interpretation

This Policy, Schedule and endorsements shall be read together as one contract and any word or expression to
which a specific meaning has been attached in any part of this Policy or of its Schedule such word or expression
shall bear the same meaning whenever it may appear
2. Other Insurances

If at the time of the occurrence of any accident there shall be any other insurance covering the same risk or any
part thereof, whether effected by the Insured or not, the Company shall not be liable to pay or contribute more
than a ratable proportion of any sum/s payable in respect of such liability, costs, expenses, loss or damage.
3. Reasonable due care
a) The Insured shall take reasonable precautions to ensure the products and containers are fit for the intended
purposes.
b) The Insured shall at their own expense take all reasonable action to trace, recall, or modify any products
containing any defect or deficiency or alleged defect or deficiency which the Insured has knowledge of or has
reason to believe could give rise to a claim under this Policy.

28
4. Claims Procedures

Upon the happening of an occurrence which may give rise to a claim or legal proceedings under this Policy the
Insured or their representative shall;
ii) Notify the Company as soon as reasonably practicable of such occurrence.
iii) Deliver to the Company in the format required a statement of the event with relevant information and other
particulars of the loss including date and circumstances of the event so far as the same is known.
iv) Preserve all property, products, appliances, plant and all other things which may assist in the investigation or
defence of the claim or suit or in the exercise of rights of subrogation.
12
v) The Insured shall not without the prior consent of the Company:
a) Admit liability or make any offer or promise of payment;
b) Take any action which may be construed as an admission of liability;
c) Repudiate or settle any claim;
d) Waive any rights of recovery.
vi) The Insured shall immediately on receipt forward to the Company every demand, writ, summons,
proceedings, impending prosecution or inquest and all documents relating to the claim or event for which there
may be liability under this policy.

The Company may pay to the Insured in respect of all claims arising directly or indirectly from one source or
original cause to the limit of liability specified in the Schedule.
Upon making such payment, the Company shall be under no further liability under the policy in connection
with such claim(s) except for legal costs and expenses:
a) Recoverable from the Insured in respect of the period prior to the date of such payment(whether or not
pursuant to an order made subsequently):or
b) Incurred by the Insured with the company‘s written consent, prior to the date of such payment.
5. Subrogation

The Company may at its own expense take and retain the absolute conduct and control of any proceedings and
may use legal means in any defence or settlement of any claim or to prosecute in the name of the Insured for
any claim for indemnity or damages. 13
6. Contribution

If at the time any claim arises under this Policy , there be any other insurance covering the same risk against
loss or damage the Company shall not be liable for more than its proportionate share of such a claim.
7. Communication

Every written communication on this Policy to the Insured shall be sent to the Insured‘s last known address or
delivered personally.
Notices and information to the Company must be in writing and sent to the registered office of the Company or
its branch office.
8. Alteration of Risk

29
The Insured shall give notice to the Company of any material alteration or change in the circumstances that may
affect the nature of the risk covered and that are likely to increase the risk of injury or damage. Until the
Company be advised of such alteration and expressly agrees in writing to accept liability for such altered risk,
the Company shall not be liable in respect of any injury or damage due to any such alteration or change in
circumstances.
9. Cancellation

This Policy may be cancelled at any time at the request of the Insured in which case the Company will retain a
premium calculated on pro rata basis for the time this Policy has been in force and provided no claim has arisen
during the current Period of Insurance.
The Policy may also be cancelled at the option of the Company on fourteen (14) days notice being given in
writing to the Insured, in which case the Company shall be liable to return a proportionate part of the premium
for the unexpired term of the Policy from the date of such cancellation. 14
10. Premium Adjustment

Whenever the premium charged on this policy is based on estimates of turnover, the Insured shall supply the
Company within one month of expiry of each Period of Insurance with an accurate statement of turnover
(expressed in Kenya shillings) during the preceding Period of Insurance and if the amount shall vary from the
amount upon which premium has been paid the premium shall be adjusted accordingly and the difference paid
by or allowed to the Insured as the case may be, subject to the Company retaining a minimum of not less than
75% of the deposit premium for any one Period of Insurance.
Should the Insured fail to supply such a declaration within one month of the expiry of the expiry of the period
of insurance, the Company shall be entitled to charge additional premium in respect of the expired period of
insurance and in any case not less than 25% of the deposit/provisional premium.
11. Dispute Resolution
a. For any disputes arising out of this Policy the Insured shall endeavor to resolve the matter by negotiation with
the Company.
b. Any disputes or issues not resolved by negotiation 30 days after the dispute arising may be resolved through
a sole mediator jointly appointed by the parties in writing.
c. Disputes that remain unresolved 60 days after the dispute arose (unless the parties extend that period in
writing) shall be resolved by a sole arbitrator appointed either by the parties in writing or, in the absence of an
agreement on the choice of arbitrator, by the Chairperson of the Chartered Institute of Arbitrators (Kenya
Branch) upon the request of any of the parties.

30
Insured, but shall not include fines, penalties, punitive damages, exemplary
damages, non-pecuniary relief, taxes, or any other amount for which an Insured
is not financially liable, or which is without legal recourse to the Insured, or any
matter that may be or be deemed to be uninsurable under Indian law.
1.14) ―Limit of Indemnity‖ means the amount stated in the Schedule, which shall be

the Company‘s total liability under this Policy (inclusive of Damages and/or
Defence Costs, and regardless of the number of Insureds or claimants or the
total number or amount of Claims made against the Insured) for any one Claim
and in the aggregate for all Claims made against the Insured during the Policy
Period.
1.15) ―Defence Costs‖ means the expenses incurred by or on behalf of the Insured or

the Company in the investigation or settlement or defence of a Claim and shall

include legal costs and disbursements.
2. Insured Persons

2.1) Subject to the Limit of Indemnity, their compliance with the terms and conditions

of this Policy and without prejudice to the Insured‘s obligations under this Policy,
in the event of a Claim indemnifiable under the Policy the indemnity provided
hereunder shall also extend in respect of such Claim to:
2.2) the directors and officers of the Insured and/or the Insured‘s legal

representatives solely arising out of their conduct of the Insured‘s Business;

2.3) the Insured's employees (permanent or temporary) solely arising out of their

conduct of the Insured‘s Business;

2.4) the officers, committees and members of the Insured's social institutions (i.e.

canteen, welfare, sport or medical facilities, firefighting brigade), if any, in their

respective capacities;
2.5) the personal representatives of the estate of any person who would otherwise be

indemnified by this Policy but only in respect of liability incurred by such person.
2.6) The rights of any person named under Clause 2.1 may only be exercised by and

through the Insured named in the Schedule, who shall act on behalf of all other
Insureds with respect to the giving and receiving of notice under this Policy,
including but not limited to the giving of notice of any Claim and the receipt and
acceptance of any endorsements attaching to and forming part of this Policy.
3. Defence Costs

The Company will, subject to the Limit of Indemnity, pay all costs, fees and
expenses incurred with their prior written consent in the investigation, defence
or settlement of any Claim and the Insured‘s costs of representation at any civil
inquest, inquiry

31
Should the Insured notify the Company during the Policy period in accordance with General condition 8.2 of any
specific event or circumstance which the Company accepts may give rise to a claim or claims which form the
subject of indemnity by this policy, then the acceptance of such notification means that the Company will deal
with such claim or claims as if they had first been made against the Insured during the Policy period. The
extension under this Clause will be subject to the maximum time limit laid down under the Indian Limitation Act
in force from time to time.
5. Extended Claim Reporting Clause:

In the event of non-renewal or cancellation of this Policy, either by the Company or by the Insured, the Company
will allow a time limit not exceeding 90 days from the date of expiry or cancellation of the policy provided no
insurance is in force during this extended reporting period for the same interest, for notification of claims for
accidents which had taken place during the period of insurance but could not be made during the policy period,
provided, however, all claims made during the extended reporting period shall be handled as if they were made
on the last day of the expiring Policy period and shall be subject to the Limit of indemnity, terms, conditions and
exceptions of the policy.
This extended reporting period does not in any way reinstate or increase the limit of indemnity mentioned in the
Schedule of the Policy.
6. Claims Series Clause:

A Claims Series Event as defined below shall be deemed to be one claim and date of loss shall be the date when
the first claim of the Claims Series Event is made in writing against the Insured.
A Claims Series Event shall be defined as a series of two or more claims arising from one specific common cause
which is attributable, e.g.
a) to the same fault in design, manufacture, instructions for use or labelling of products

b) or to the supply of the same products and/or services or to products and/or service showing the same defect.

There shall, however, be no coverage for claims arising from one specific cause which are made later than 3 years
after the first claim of the series
7. Exclusions
Save as expressly stated to the contrary, the Company is not liable for and no indemnity is available under this
Policy for any Claim arising out of or howsoever connected to the following:
7.1) Costs of Remedying Defective Product.: - The policy excludes liability for costs in

the repair, reconditioning, modification or replacement of any part of any product

which is or is alleged to be defective.
7.2) The recall of any Product or any part thereof.

7.3) Any Product which the Insured knew or ought to have known was intended for

incorporation into the structure, machinery or control of any aircraft.

32
7.4) Product guarantee.

7.5) The failure of Products to fulfil the purpose for which they were intended.

7.6) Any agreed assumption of risk by the Insured, save to the extent that liability

would have attached in the absence of such agreement.

7.7) Any Accident arising out of the deliberate, wilful or intentional non-compliance

with any statutory provision.

7.8) Any Bodily Injury of any person under a contract of employment or apprenticeship

with the Insured, or the Insured's contractors or sub-contractors, if such Bodily

Injury was contracted and/or arose out of and in the course of his employment.
7.9) The Insured‘s consequential losses of any kind, be they by way of loss of profit,

loss of opportunity, business interruption, market loss or otherwise, or any claims

arising out of loss of a pure financial nature such as loss of goodwill.
7.10) The infringement of plans, copyrights, patents, trade names, trademarks or

registered designs.
7.11) Libel, slander, false arrest, wrongful eviction, wrongful detention, defamation

including mental injury, anguish or shock resulting therefrom.

7.12) Deliberate, Willful or Intentional Non-Compliance of Any Statutory Provision(s)

7.13) Any Claim directly or indirectly caused by or contributed to by:

a. ionising radiation or contamination by radioactivity from any nuclear fuel or from any nuclear waste or from
the combustion of nuclear fuel;

b. the radioactive toxic explosive or other hazardous properties of any explosive nuclear assembly or nuclear
component thereof.

7.14) Damage to property belonging to third parties that is rented, leased or hired or

under hire-purchase or on loan to the Insured or in the Insured‘s custody, care or

control.
7.15) Damage to property belonging to third parties handled by the Insured by way of

his trade or worked upon by or in the care, custody or control of the Insured or
any person employed by or working for the Insured.
7.16) The deliberate, conscious or intentional disregard by the Insured's management

of the need to take all reasonable steps to prevent Bodily Injury and/or Property
Damage.
7.17) Bodily Injury and/or Property Damage occurring prior to the retroactive date (if

33
any) specified in the Schedule.
7.18) Pollution of any kind.

7.19) Any Claim made, threatened or intimated against the Insured prior to the Period

of Insurance/ Retroactive date

7.20) Any Claim directly or indirectly arising out of, or in any way involving any fact or

circumstance of which written notice has been given, or ought reasonably to have
been given, under any previous policy (whether insured by the Company or not);
or of which the Insured first became aware prior to the Period of Insurance and
which the Insured knew or ought reasonably to have known had the potential to
give rise to a Claim.
7.21) Directly or indirectly arising out of, or in any way involving war, invasion, acts of

foreign enemies, hostilities (whether war be declared or not), civil war, rebellion,
revolution, insurrection, military or usurped power or confiscation or
nationalisation or requisition of or damage to property by or under the order of
any government or public local authority.
7.22) Liability more specifically insured elsewhere.

8. General Conditions
8.1) Due Observance

The due observance and fulfilment of the terms, provisions and conditions of this Policy in so far as they relate
to anything to be done or complied with by the Insured shall be conditions precedent to any liability of the
Company.
8.2) Duties and Obligations of the Insured in the event of a Claim

It is a condition precedent to the Company‘s liability hereunder that the Insured:

a. shall immediately and in any event within 7 days give the Company written notice, to the address specified in
the Schedule for this purpose, of: any Claim made against the Insured, and/or any circumstance which might
reasonably be expected to give rise to a Claim. Any circumstance notified hereunder and any subsequent Claim
arising out of the circumstance so notified shall be deemed to have been made during the Policy Period;

b. shall not admit liability for or settle or compromise or make or promise any payment in respect of any Claim
which may be the subject of an indemnity hereunder or incur any costs or expenses in connection therewith
without the prior written consent of the Company, which shall be entitled (but in no case obliged) to take over
and conduct in the name of the Insured the investigation, defence and/or settlement of any Claim, for which
purpose the Insured shall give all the information, documentation, records and other assistance that the Company
and/or its representatives may reasonably require. Having taken over the defence of any Claim, the Company
may in its sole and absolute discretion relinquish the same.

c. The Company will not settle any Claim without the consent of the Insured. If, however, the Insured refuses to
consent to any settlement recommended by the Company and elects to contest or continue any legal proceedings
then the liability of the Company shall not exceed the amount for which the Claim could have been so settled
plus the costs and expenses incurred with their consent up to the date of such refusal.

34
d. In respect of any Claim, the Company may in its sole and absolute discretion make a payment to the Insured
(inclusive of Defence Costs) of the amount available under the \ Limit of Indemnity or of any lesser amount for
which the Claim may in fact be settled (whichever is the lesser) in full and final settlement of all liability of the
Company to the Insured under this Policy in respect of that Claim.

e. All amounts expended by the Company in the payment of any Claim or in Defence Costs will reduce the Limit
of Indemnity.

8.3) Other Insurance

If, at the time of any Claim, there is, or but for the existence of this Policy, would be any other policy of indemnity
or insurance in favour of or effected by or on behalf of the Insured applicable to such Claim, the then the Company
shall not be liable to pay or contribute more than its ratable proportion of any loss or damage.
8.4) Fraud

The company shall not be liable and this Policy shall be void and all Claims or payments hereunder shall be
forfeited, if such claim shall be in manner be fraudulent or supported by any statement or device whether by
insured or by any person on behalf of the insured and/or if the insurance has been continued in consequence of
any material mis-statement or the non disclosure of any material information by or on behalf or the insured.
8.5) Records

The Insured shall keep accurate records of its annual turnover, including all taxes and duties paid by it, and will
provide the Company with access to such records as requested.
8.6) Assessment of Time

If, in the case of continual and continuous inhalation, ingestion or application of any substance resulting from an
insured event, the Insured and the Company should disagree as to when the Bodily Injury or the Property Damage
happened:
the Bodily Injury shall be deemed to have occurred when the claimant first consulted a qualified medical
practitioner in respect of the same;
Property Damage shall be deemed to have occurred when it first became physically evident to the claimant, even
if the cause itself was unknown.
8.7) Cancellation

This Policy may be cancelled by or on behalf of the Company by giving the Insured at least 15 days written notice
and in such event the Company shall refund to the Insured pro-rata premium for the unexpired Policy Period. For
the avoidance of doubt, the Company shall remain liable for any Claim which was made prior to the date upon
which this insurance is cancelled.
This Policy may be cancelled by the Insured at any time by giving at least 15 days written notice to the Company.
The Company will refund premium according to the Company's Short Period Rates set out below:
Short Period Scale Period of Risk % of annual premium to be retained by
the Company
Upto 1 month 15%
More than 1 month upto 3 months 40%
More than 3 month upto 6 months 70%
More than 6 months upto 9 months 90%
More than 9 months 100%

35
What is certificate of liability insurance?
If you own a business, liability insurance protects you if there's an accident or injury in your workplace or caused
by one of your employees. Your general liability policy also protects any other business that hires you as a
subcontractor. If you cause an accident or damage property while you're working as a subcontractor, your liability
insurance pays the bill, and the company you're working for isn't held liable for the damages. If you subcontract
with other companies, or you hire subcontractors as part of your business, a certificate of liability insurance serves
as proof of insurance coverage.

Liability Insurance
Depending on the type of work you do, you may have more than one type of liability insurance. A general liability
policy protects you from many potential losses, including a lawsuit by a customer who slips inside your store and
a mistake by a worker who damages someone's property. It could protect you in most lawsuits you might
encounter as a business person, including libel and slander.
Professional liability insurance protects you from malpractice or errors you might make in your profession.
Doctors carry professional malpractice insurance, but certified public accountants, engineers and other
professionals do too. Your state may require you to have professional liability insurance to practice your
profession. If you manufacture and distribute a product, you may have product liability insurance to protect you
from any potential harm the product may cause.
Certificate of Insurance
A certificate of liability insurance provides the basics about your insurance coverage on a single page. Rather
than having to read through your entire insurance policy, a business that wants to subcontract work to you can
find everything it needs to know on one page: your policy number, the name of your agent, the types of coverage
and coverage limits and the dates the policy is in effect. If you hire a subcontractor, the certificate of liability
insurance is your reassurance that the company is insured and you'll be protected in the event of an accident.
Receiving the Certificate
When a potential contractor requests a certificate of liability insurance from you, contact your insurance company
and ask that a copy of your certificate be sent to the person who requested it. This provides an extra level of
reassurance against fraud, because the certificate comes from your insurance company, not from you. Likewise,
when you request a certificate of liability insurance from a potential subcontractor, it should come from her
insurance agent, not from her. If you still have concerns, call the agent listed on the policy to verify insurance
coverage.
Why You Need a Certificate
If a subcontractor you hire causes damage to equipment you own and you want to make a claim, all the
information you need will be on the certificate of liability insurance you should have on file. Your insurance
company may also require you to obtain certificates of liability insurance from any subcontractors you use and
keep them on file. Your insurance company has the right to audit you and request these certificates. If your insurer
finds you are using uninsured subcontractors or that you don't have certificates for all your contractors, it can
assess an additional premium or it might drop your insurance coverage.

36
Provisions under the Consumer Protection Act, 1986

The Consumer Protection Act has laws surrounding a manufacturer‘s and supplier‘s liability for defective
products. Subject to some exceptions, the Act holds any producer or importer, distributor or retailer of any goods
liable for any harm caused wholly or partly as a consequence of:

 supplying any unsafe goods;

 a product failure, defect or hazard in any goods; or
 inadequate instructions or warnings provided to a consumer pertaining to any hazard associated with
the use of the goods,

Irrespective of whether such harm resulted from any negligence on the part of the producer, importer, distributor
or a retailer.
For the purpose of this Act, a supplier of services who applies, supplies, installs or provides access to any goods,
will be regarded as a supplier of those goods to a consumer. If more than one person is liable to a consumer, their
liability is joint and several.

Are there any exceptions to the liabilities of a manufacturer or supplier?

There are certain exceptions to the strict liability imposed under this act. Some of these exceptions include the
situations where:

 The characteristic, defect, failure or hazard did not exist in the goods at the time it was supplied to
another person who is alleged to be liable;
 The harm was wholly attributable to compliance by the person blamed with instructions provided by
the person who supplied the goods to that person;
 It is unreasonable to expect the distributor or retailer to have discovered the unsafe product
characteristic, failure, defect or hazard, having regard to that person‘s role in marketing the goods to
consumers; or
 The claim is brought after the expiry of certain

Consumers may claim under this Act for harm which includes death, injury or illness to any natural person, any
loss of or physical damage to any property, and any contemplated economic loss that results from that harm.

The implications of the Consumer Protection Act for entities forming part of the manufacturing process or the
supply chain appear to be quite severe. Furthermore, a supplier may not deprive a consumer of any right in terms
of the Act.

Who can file a Consumer Suit?

The Consumer Protection Act provides that a consumer itself; any voluntary organisation registered under The
Companies Act, 1956 or under any other law for the time being in force; the Central government or State
government or one or more consumers (where there are numerous consumers having same interest) can file a
complaint under the Act.

37
Besides them, any person who is a beneficiary of the goods or services, legal representative or legal heir of the
deceased consumer, husband or relative of the consumer can also file a complaint.

Can the complaint be filed without hiring the services of an Advocate or lawyer?

Yes. The consumer protection Act has provided a very simple procedure to file the complaint that even a person
from non-legal background can file the complaint on its own. There is a nominal fee to be paid in form of a
crossed demand draft drawn on a nationalized bank or through a crossed Indian Postal Order in Favour of the
Registrar of the State Commission & payable where it is situated. But the complaint has to be filed within two
years from the day the deficiency in service or defect in goods has arisen/detected, however this is not a strict
rule, in certain circumstances if you are able to satisfy the court the reasonability in the delay causing the case
can still be taken up.

How to file a consumer suit?

In cases where the value of goods and services involved is less than Rs. 20 Lakhs in value, the complaint has to
be filed with the District Forum constituted in the specified districts of a State. In cases where the value of goods
and services involved is more than Rs. 20 Lakhs in value but does not exceed Rs 1 Crore, the complaint has to
be filed with the State Commission constituted in the capital cities of the different states and where the value of
goods and services involved is more than 1 Crore then the complaint is to be filed with the National
Commission which has been constituted in New Delhi.

To file a complaint, firstly, the jurisdiction of the complaint is determined by the facts of the case and where the
cause of action arises. The area in which the opposite party resides or carries on his work or business will also
have to be taken into consideration by you. If you file a complaint against a service provider for a sum below 20
Lakhs, the District Forum in the jurisdiction where the cause of action arose is to be approached. If the matter is
above 20 Lakhs but below 1 Crore, then complaint has to be filed with the State Commission within which State
the trader/ service provider/ manufacturer resides or works in.

A prescribed fee along with the complaint before the District Forum, State Commission & the National
Commission as the case may be, has to be paid. The complaint should state the facts necessary to establish a
cause of action. The name, description and address of the complainant and the name, description, address of the
opposite party/parties against whom relief is claimed has to be mentioned. Also, put on record the copy of the
bill of the goods bought, warranty and guarantee documents and also a copy of the written complaint and notice
made to the trader requesting him to rectify the product. Complaint must clearly state as to what relief is sought
against the opposite party. An affidavit along with the complaint that facts stated in the complaint are true and
correct.

Trigger & Notifications

Product Liability insurance policy are written either on an occurrence basis (i.e. the damage must occur the period
of cover for the policy to be triggered) or on a claims made basis, against the insured by a third party during the
policy period.
Insureds will need to pay close attention to the notifications provisions in the policy, and consider this carefully
whenever a product safety situation arises. The notification requirements under a product liability policy written
on a claims-made basis will in variably include provisions relating to notification of claims, and of circumstances

38
which may all are likely to give arise to a claim. The requirements for notification of circumstances usually also
include a ‗deeming‘ provision, under which claims arising after the expiry of the policy period but out of the
circumstances previously notifies to insurer a deem to attach to the policy under which notification of
circumstances was given

External Damage

A product liability policy is principally concerned with damage caused to persons and other property by a
defective product that is supplied by the insured. In this regard, the policy reflects the law of tort which generally
requires some form of external physical loss or damage to trigger liability.

In English law, "damage" usually refers to a changed physical state to external property in circumstances where
the relevant alteration is harmful in the commercial context. A defect or deterioration in the commodity or
product itself is not "damage". Some product liability policies may, however, contain express provision that
damage caused by a defective part to another part or other parts of a larger item which is not defective or
inadequate will be covered (again, this akin to the position in tort for negligence).

The application of the requirement for physical damage can give rise to difficulties, where the product supplied
by the insured is to be installed in a larger item for use or onward sale by a third party. There will be a distinction
between cases where the product causes damage to the larger item (covered), and where the defect in the product
itself becomes manifest but without causing any damage beyond itself (not covered).

The test is whether there has been any physical change to the larger item as a result of the incorporation or
inclusion of the defective product. If the defective product causes harm to the larger product, such that its value
is diminished, physical damage will have occurred. In Trioxide Europe Ltd v CGU International Insurance Plc
[2004] EWHC 2116 (Comm), a defective whitening pigment used in the manufacture of PVC doors which had
caused the PVC to turn pink was found to have caused physical damage to the PVC, for the purposes of the
insurance cover. In Omega Proteins v Aspen Insurance UK Ltd [2010] EWHC 2280 (Comm), although the
question of whether there had been damage to property within the meaning of the product liability policy was not
in issue, the judge proceeded on the basis that the mixing of contaminated material (fit only for disposal) with
other materials caused damage to those other materials (by rendering them unusable).

The principle will not, however, apply where a product is installed or fitted alongside the property of a third party
where no physical harm is caused and the harmful effects are confined to the product itself. In Pilkington United
Kingdom Ltd v CGU Insurance Plc [2004] EWCA Civ 23, glass panels supplied by Pilkington were installed in
the roof and vertical panelling of the Eurostar Terminal at Waterloo in London. A small number of the panels
were defective and fractured on installation, although no physical damage was caused to the building. The
insurance policy excluded cover for products which were defective at the time when installed and, as the Court
held that the only damage was to the glass panels themselves (and not to third party property), the claim failed.

39
Extensions are sometimes available which extend the scope of cover under a standard product liability insurance
policy, to sums for which the insured becomes legally liable in respect of claims for the diminution in value of a
product. This arises from any defect in any ingredient or substance supplied by the insured which is mixed or
blended with other ingredients or substances for the purposes of creating an end product, and which results in
that end product being defective or harmful. These are often referred to as mixing or blending losses extensions.
Such extensions can be extremely valuable for manufacturers or retailers of ingredients and other substances
which are mixed or blended in a finished product.

Pure Economic Loss

As product liability policies are principally directed to damage caused to persons and other property by a defective
product supplied by the insured, the English courts tend to construe cover under such policies in accordance with
the law of tort. Accordingly, product liability cover will not normally extend to liability for pure economic
financial losses which are not consequential upon the damage.

This is exemplified by Horbury Building Systems Ltd v Hampden Insurance NV [2004] 2 CLC 543, where the
insurance claim related to the costs associated with the collapse of a suspended ceiling installed in a cinema
auditorium. The cause of the collapse was initially unknown and the whole cinema complex was closed for
several weeks; although it was accepted by the parties that the damage caused by the collapsed ceiling had not
physically prevented the use of the rest of the complex. The court held that the insurer was not liable to indemnify
the insured subcontractor, in respect of loss of profit arising from the closure of the entire cinema complex; the
policy only covered liability for the physical consequences of the damage in the auditorium where the ceiling
collapsed and the economic losses caused by that physical damage. The policy did not extend to matters such as
the cost of the investigations or precautions taken to avoid physical damage.

Some policies contain financial loss extensions, which cover liability for third party financial losses in the absence
of injury or damage. Such coverage tends to be limited but can be particularly valuable; liability for pure
economic loss can freely arise in contract, and in some jurisdictions, in tort as well. These extensions can also be
combined with product guarantee insurance, which provides protection against an insured's legal liability for
claims arising out of the failure of its product to fulfil its intended purpose or function (discussed further below).

Exclusions

There are a number of exclusions generally included in product liability insurance policy wordings which can
operate to exclude liability otherwise falling within the scope of the cover. The most common exclusions include:

The costs of recalling, replacing or repairing the product itself. Plainly, these costs fall outside of the general
ambit of a product liability policy which is principally concerned with liability for damage caused to persons and
other property. Insureds can protect themselves against the costs of a product recall by obtaining product recall
insurance (discussed below).
Liability assumed by contract or agreement. This exclusion reflects the fact that product liability coverage is
designed to cover the insured's liability for injury to persons or damage to physical property. It is not ordinarily
intended to cover those types of losses which might be recoverable in a claim for breach of contract, unless such
liability would have arisen in tort in any event. Such exclusions do not always make it clear, however, whether
the test is: (i) liability in tort as if no contract between the claimant and the insured had existed; or (ii) liability in
tort assuming the existence of a contract. In Omega Proteins v Aspen Insurance UK Ltd the judge considered
that an exclusion for "any liability arising ... under any contract or agreement unless such liability would have
attached in the absence of such contract or agreement" invited consideration as to what liability would have

40
attached in the absence of a contract (but the facts were otherwise as they were), not whether there was a liability
contract.It is possible to obtain contractual liability extensions but care must be taken with the way these are
drafted to ensure that they do not simply cover contractual liability which is concurrent with that in tort (which
is normally covered in any event). Issues can arise where a policy extension provides cover for liability assumed
under contract, but the extension remains subject to the insuring clause under which cover is restricted to liability
―for or in respect of [bodily injury, property damage etc.]‖. In such cases pure economic losses (i.e. financial
losses which do not arise directly from bodily injury or property damage) would not be covered by the policy
even though they may be recoverable from the insured under contract.

Liabilities which arise from the failure of an insured product to perform its function (so-called "product efficacy"
exclusions). Product functionality is only relevant where the failure of product function may give rise to liability.
The functionality failure of certain products (such as clothing, electrical goods or toys) will not necessarily cause
liability for loss or damage. However, failure of other products to perform effectively (such as medicines or fire
extinguishers) will almost certainly give rise to loss and/or damage.
The insured's deliberate acts or omissions which can reasonably be expected to cause harm, loss or damage which
is the subject of the claim. Where an insured fails to carry out adequate due diligence in respect of a product or
reacts poorly in the wake of a product liability issue, insurers may seek to deny cover on this basis. Care should
be taken to ensure that the wording of the policy and the exclusions reflects the nature of the insured's business,
particularly where there may be technical reasons for a product's failure/defect. If the policy terms are
inappropriate or poorly drafted, there may be grounds for dispute. In John Reilly v National Insurance &
Guarantee Corporation Ltd [2008] EWHC 722 (Comm) the Court was unable to determine whether product
efficacy exclusion applied, as there was a lack of clarity about how the clause applied to insured's products. As
a result, it was ultimately unable to determine policy coverage.

Damage

The Enterprise Act 2006 amends the Insurance Act 2015 and introduces an implied term into every insurance
contract that "the insurer must pay any sums due in respect of the claim within a reasonable time", which includes
a reasonable time to investigate and assess the claim. What is reasonable will depend on all the relevant
circumstances, but examples of things which may need to be taken into account include the type of insurance, the
size and complexity of the claim, compliance with relevant statutory or regulatory rules or guidance and factors
outside the insurer's control. Such a term is only implied into insurance contracts made after 4 May 2017. The
insurer will have a defence where it can prove there were reasonable grounds for disputing the claim.

Product

The costs of a product recall can be substantial, particularly where the products are distributed internationally and
can include: (i) costs in the supply chain (such as manufacturing plant cleaning costs and material write offs); (ii)
the handling costs of the recall (which can include customer returns, call centre costs, trade claims, costs relating
to the storage and disposal of the recalled products and advisory fees); and (iii) loss of profit (including both
immediate trading losses and damage to reputation and goodwill).

In the current climate, many manufacturers and distributors now seek to protect themselves against the
consequences of an expensive product recall through insurance cover.

41
This form of insurance used to be something of a speciality but has become increasingly popular in recent
years. A wider array of coverage options has become available although the number of insurers active in the field
remains relatively small.

Event triggering the recall cover

The nature of the event that is necessary to trigger the insurance cover will normally depend upon the form of
indemnity. Indemnities for legal liability tend to be written on a claims made basis requiring notification of a
claim (or circumstances which may or are likely to give rise to a claim) during the policy period. Indemnities for
the costs and expenses of a recall, by contrast, are normally triggered by the insured's decision to recall the product
being taken (and notified to insurers) during the period of insurance.

Where the cover is for the costs and expenses incurred by the insured in respect of a product recall, the policy
will often stipulate that the recall must be necessary in order to prevent or mitigate the prospects of legal liability
arising from the use or consumption of the product. Some product recall insurance policies will contain more
stringent limitations, which specify that there must be an actual or imminent threat of danger, injury or harm
associated with the product's use. The regulatory regime in the UK encourages pro-active steps (including recall)
when an unsafe product may have been placed on the market. Insureds may, therefore, find that they are
potentially exposed to uninsured losses, where a precautionary recall was carried out in the absence of actual or
imminent danger of injury or harm (if such was required by their policy). Similarly product recall cover may not
be available where a business decides to carry out a recall voluntarily for commercial reasons (e.g. due to a quality
defect only in order to protect the brand).

Exclusions

Product recall policies will also contain a number of exclusions, the most common of which include the following:

Where a product recall is necessitated by a product defect which has arisen solely due to:
exposure to weather or the deterioration or decomposition of a product (e.g. fresh food items); or
the fact that a product does not accomplish its intended purpose or comply with other implied statutory warranties,
or has passed its shelf life; or
contamination or other defect arising out of bioengineering or GM treatment; or
the failure of any third party to store or consume the product in the prescribed manner.
Prototypical or experimental products which, by their very nature, are expected to experience problems in the
nascent stages of development are also generally excluded.
Product recalls which are forced upon the insured by the government or a public authority, in circumstances
where the insured would not have conducted the recall but for the said intervention.

Practical considerations

Insureds should establish and shock-test the product recall planning procedures which are in place and ensure
that they accord with the requirements of any product insurance held (particularly in terms of notifications to
insurers). Such requirements may include:

Maintaining detailed records of any expenses incurred and actions taken in a product recall situation, including
steps taken to mitigate or minimise the costs involved.
Submitting proof that such costs were reasonably and properly incurred.

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Proposal Form / insured's duty of disclosure

When a product manufacturer or distributor decides to take out a product liability insurance policy, they will be
required to complete a proposal form. This form provides key information to the insurer about the insured's
business, the type of products it sells/distributes and the countries where the products are sold/distributed.

The business seeking insurance cover will also be required to disclose to the prospective insurer any other material
facts which it knows or ought to know, and which are relevant to the products being insured. This obligation
forms part of the general duty of good faith imposed by law in respect of contracts of insurance (which are based
on the principle of utmost good faith). If the insured fails to disclose a material fact, and if the insurer can show
that such non-disclosure induced it to enter into the policy, it can avoid the contract in its entirety.

The Insurance Act 2015 (which came into force on 12 August 2016) changes a number of aspects of the existing
law, including in particular the consequences of breach by the insured of its duty of disclosure. The Act provides
remedies for breach which are more flexible and proportionate than those currently in force:

- The insurer can still treat the policy as void from the outset if: (i) the insured's breach of its disclosure duty
was deliberate or reckless (with no return of premium); or (ii) if the insurer would not have entered into the policy
at all if proper disclosure had been given (but must return the premium).

- However, if the insurer would still have entered into the policy but on different terms, the policy may be
treated as if it included those terms from the outset; and if the insurer would have entered into the policy but at a
higher premium, the amount paid on claims may be reduced proportionately.

The changes are not retrospective, and so the old regime will continue to apply to policies entered into before 12
August 2016.

LiabilitySystems
1.1 What systems of product liability are available (i.e. liability in respect of damage to persons or property
resulting from the supply of products found to be defective or faulty)? Is liability fault based, or strict, or both?
Does contractual liability play any role? Can liability be imposed for breach of statutory obligations e.g. consumer
fraud statutes?

In India, product liability law governs the liability of manufacturers, wholesalers, distributors, and vendors for
injury to a person or property caused by dangerous or defective products.

Product liability in India is governed by:

a) The Consumer Protection Act, 1986.

b) The Sales of Goods Act, 1930.

c) The law of Torts.

d) Special statutes pertaining to specific goods.

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Previously, the Monopolies and Restrictive Trade Practices Act, 1969 (hereinafter referred to as the ―MRTP Act‖)
dealt with provisions in respect of unfair trade practices. The Act now stands repealed and the pending cases of
unfair trade practices have been transferred to the National Commission set up under the Consumer Protection
Act, 1986.

1.2 Does the state operate any schemes of compensation for particular products?

No, the State does not operate any schemes of compensation for particular products.

1.3 Who bears responsibility for the fault/defect? The manufacturer, the importer, the distributor, the ―retail‖
supplier or all of these?

Any person who trades in the goods (manufacturers, importers, distributors, wholesalers, etc.) may be made liable
under Indian law.

As per the Consumer Protection Act, the definition of trader (Section 2(1) (q)) and manufacturer (Section 2(1)
(j)) is exhaustive and includes: any person who sells or distributes any goods for sale; manufacturers; assemblers;
dealers; or any person who causes his or her own mark to be put on any goods made or manufactured by any
other manufacturer and claims such goods to be goods made or manufactured by himself or herself.

Bearing in mind the law on privity of a contract, if a consumer finds a defect in the goods, he or she usually sues
the person from whom he or she has bought the goods. However, if the defect is a manufacturing defect, the
consumer may sue the manufacturer along with the seller, particularly under the law of tort. This is an option for
the consumer.

1.4 May a regulatory authority be found liable in respect of a defective/faulty product? If so, in what
circumstances?

A regulatory authority can be held liable where it is negligent in inspecting/reporting/lack of exercise of

monitoring control. For example, if it passes food products which do not meet the standards prescribed by law.

The Food Safety Officer under Food Safety and Standards Act, 2006 (FSSA) shall be liable to a penalty which
may extend up to one lakh rupee if he/she is found to be guilty of an offence under section 39 of the Act.

1.5 In what circumstances is there an obligation to recall products, and in what way may a claim for failure
to recall be brought?

Section 14(1) (h) states that the District Forum under the Consumer Protection Act can require direct withdrawal
of all hazardous goods from the market and direct compensation to be paid to affected parties.

As per Section 27 of the Consumer Protection Act, if a trader fails or omits to comply with any order of the
District Forum, such person shall be punishable with a term of not less than one month, but which may be
extended to three years or a fine of 2,000 rupees, but which may be extended to 10,000 rupees, or both. Also,
Section 25 of the said Act empowers the District Forum or State Commission or National Commission, as the
case may be, to attach property of the person who does not comply with its orders. If a person fails to pay an
amount as per an order passed by a district court, then such person may move an application before the District
Forum which shall issue a certificate to the collector of the district, and such collector shall proceed to recover
the said amount from such person as arrears of the land revenue.

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1.6 Do criminal sanctions apply to the supply of defective products?

Under the Consumer Protection Act, as per Section 27, where a trader or a person against whom a complaint is
made or the complainant fails or omits to comply with any order made by the District Forum, the State
Commission or the National Commission, as the case may be, such trader, person or complainant shall be
punishable with: imprisonment for a term of not less than one month, but which may be extended to three years;
a fine, which shall not be less than 2,000 rupees, but which may be extended to 10,000 rupees; or both. Criminal
sanctions may also be imposed under other statutes specifically providing for such sanctions.

2
Causation
2.1 Who has the burden of proving fault/defect and damage?

The burden of proof generally lies with the party who is alleging the fault/defect and damage or who initiates the
civil action (plaintiff).

2.2 What test is applied for proof of causation? Is it enough for the claimant to show that the defendant
wrongly exposed the claimant to an increased risk of a type of injury known to be associated with the product,
even if it cannot be proved by the claimant that the injury would not have arisen without such exposure? Is it
necessary to prove that the product to which the claimant was exposed has actually malfunctioned and caused
injury, or is it sufficient that all the products or the batch to which the claimant was exposed carry an increased,
but unpredictable, risk of malfunction?

In order to recover damages under tort of negligence, a plaintiff must prove the following:

1. the manufacturer owed a duty to the plaintiff;

2. the manufacturer breached a duty to the plaintiff;

3. the breach of duty was the actual cause of the plaintiff‘s injury;

4. the breach of duty was also the proximate cause of the injury; or

5. the plaintiff suffered actual damages as a result of the negligent act.

The law requires that a manufacturer exercises a reasonable degree of standard of care akin to those who are
manufacturing similar products. In case the plaintiff can prove that a manufacturer has failed to exercise the
reasonable standard of care, the plaintiff still needs to prove two parameters of causation. The plaintiff must first
show injury was caused to the plaintiff due to the manufacturer‘s negligence and further that the defendant could
have foreseen the risks that led to such an injury.

On the other hand, in a contract, the plaintiff is required to prove that the breach of contract was the actual and
effective cause of the loss which has been sustained.

The burden lies with the party alleging a fault has been made by the other party or the goods were defective. There
needs to be a proximate cause and effect relationship and goods are considered defective where there is a high
risk of malfunction.

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What is the legal position if it cannot be established which of several possible producers manufactured the
defective product? Does any form of market-share liability apply?

Market-share liability does not generally apply. In many such cases, the claim stands dismissed.

2.4 Does a failure to warn give rise to liability and, if so, in what circumstances? What information, advice
and warnings are taken into account: only information provided directly to the injured party, or also information
supplied to an intermediary in the chain of supply between the manufacturer and consumer? Does it make any
difference to the answer if the product can only be obtained through the intermediary who owes a separate
obligation to assess the suitability of the product for the particular consumer, e.g. a surgeon using a temporary or
permanent medical device, a doctor prescribing a medicine or a pharmacist recommending a medicine? Is there
any principle of ―learned intermediary‖ under your law pursuant to which the supply of information to the learned
intermediary discharges the duty owed by the manufacturer to the ultimate consumer to make available
appropriate product information?

When goods are transferred under a contract, the liability of parties is governed by the contract itself. In certain
cases, there is an implied condition that goods will be reasonably fit for the purpose for which they are required
by the buyer. If, while selling goods under a contract, the defendant expressly excludes his liability, he cannot
be made liable for the loss caused to the plaintiff. Liability may arise.

Section 16 of the Sale of Goods Act prescribes implied conditions as to quality or fitness. Section 16(1) requires
that the goods shall be reasonably fit for the purpose, made known to the seller by the buyer expressly or by
implication. Section 16(2) requires only that the goods should be of merchantable quality. Secondly, Section
16(1) is excluded where the buyer does not rely on seller‘s skill or judgment. Section 16(2) is not so limited,
although it does not apply when the buyer examines the goods with regards to defects and such examination
ought to have revealed the defects. Where a defect is revealed to the buyer, not only is Section 16(2) excluded,
but that fact will normally indicate that it is unreasonable for the buyer then to rely on the seller for the purposes
of Section 16(1).

In addition, liability may be found under tort law. When a tin had a defective lid to the knowledge of the seller
and he failed to warn the buyer about it, the defendant will be liable for injury caused to the buyer as a
consequence thereof (Clarke v Army and Navy Cooperative Society ltd [1903] 1 K.B. 155).

Liability towards the ultimate transferee could be based on fraud where there is false representation that goods
are safe. In the case of dangerous goods, such as loaded firearms, it is required to give added precaution and
warning to the intermediary, as well as the ultimate transferee. In Dixon v Bell (1816) 4M&S 198, the defendant
gave a servant a loaded gun which she fired on the plaintiff who was seriously injured. The defendant was held
liable for the same.

In case of things which are not dangerous per se, but known to be so, the transferor owes a duty to warn about
the known dangers not only to the immediate transferee, but to all persons likely to be endangered by such thing.

For the third category, things neither dangerous per se, nor known to be so by the transferor, but are in fact
dangerous, the application of Donoghue v Stevenson principle requires the manufacturer to take reasonable care
(when something is to reach the ultimate consumer without any possibility of intermediate examination) and is
liable for not taking such care despite there being no privity of contract. This liability principle has extended to
repairers, assemblers, builders and suppliers of products.

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Defences
3.1 What defences, if any, are available?

A probable defence could be that the defect had occurred due to the negligence or contributory negligence of the
buyer. An additional defence would be that the buyer had examined the goods prior to purchase. Also, the parties
can rely on contractually agreed warranties or waivers or disclaimers and clauses on limitation of liability. The
expiration of limitation periods for filing or initiating claims can also be a defence.

3.2 Is there a state of the art/development risk defence? Is there a defence if the fault/defect in the product
was not discoverable given the state of scientific and technical knowledge at the time of supply? If there is such
a defence, is it for the claimant to prove that the fault/defect was discoverable or is it for the manufacturer to
prove that it was not?

In general, in the Consumer Protection Act, onus is on the plaintiff to prove fault could have been discovered by
the manufacturer.

3.3 Is it a defence for the manufacturer to show that he complied with regulatory and/or statutory
requirements relating to the development, manufacture, licensing, marketing and supply of the product?

Yes, if the product complies with statutory standards relating to manufacturing, licensing, marketing and
supplying, the same can be argued as a defence.

3.4 Can claimants re-litigate issues of fault, defect or the capability of a product to cause a certain type of
damage, provided they arise in separate proceedings brought by a different claimant, or does some form of issue
estoppel prevent this?

Under the doctrine of res judicata, parties are estopped between themselves from re-litigating issues determined
by the final judgment of any competent court or tribunal. Different claimants may be able to re-litigate issues in
separate proceedings; however, a claimant could be prevented from re-litigating an issue decided in a previous
proceeding on the grounds of abuse of process by re-litigation.

3.5 Can defendants claim that the fault/defect was due to the actions of a third party and seek a contribution
or indemnity towards any damages payable to the claimant, either in the same proceedings or in subsequent
proceedings? If it is possible to bring subsequent proceedings is there a time limit on commencing such
proceedings?

The liability of joint tortfeasors is joint and several. No tortfeasor is allowed to claim that the decree against him
should be only to the extent of his fault. The court may apportion damages between tortfeasors for the purpose
of respective liability inter se (Amnthiben v SC, ONGC). In Amnthiben v SC, ONGC [1976] ACJ (72) (Guj.),
due to the negligence of the driver of a jeep and the driver of a bus, there was an accident and a passenger sitting
in front of a jeep was thrown and killed. The ratio of the negligence of the driver of the bus compared to the
driver of the jeep was 75:25. A decree against the defendants was passed making them liable jointly and severally
to pay damages. Apportionment of damages was inter se made to work out the respective liability of the
defendants. The limitation period to begin a case for recovery is generally three years from the cause of action.

3.6 Can defendants allege that the claimant‘s actions caused or contributed towards the damage?

47
Yes. For example, where a pedestrian tries to cross the road all of a sudden and he is hit by a car, he is guilty of
contributory negligence.

Procedure
4.1 In the case of court proceedings, is the trial by a judge or a jury?

As the Indian legal regime is based on the common law system, the court system is adversarial and an impartial
judge adjudicates a case. The jury system does not exist in India.

4.2 Does the court have power to appoint technical specialists to sit with the judge and assess the evidence
presented by the parties (i.e. expert assessors)?

Yes, experts may be appointed by courts for any expert testimony if required under the Code of Civil Procedure,
1908.

4.3 Is there a specific group or class action procedure for multiple claims? If so, please outline this. Is the
procedure ‗opt-in‘ or ‗opt-out‘? Who can bring such claims e.g. individuals and/or groups? Are such claims
commonly brought?

Under the Consumer Protection Act, 1986, any voluntary consumer association registered under the Companies
Act, 1956, or under any other law for the time being in force, can file a consumer complaint, and where there are
numerous consumers having the same interest, they can file a consumer complaint with the leave of the court
(forum).

4.4 Can claims be brought by a representative body on behalf of a number of claimants e.g. by a consumer
association?

Yes, a complaint for a class action can be filed by any trade association, consumer or registered consumer
association or by the Central or State Government, where one or more consumers have a common
interest. (Section 2(1) (b) Consumer Protection Act, 1986.) In Consumer Protection Council, Rourkela v Indian
Oil Corporation Ltd & OTHERS, ORIGINAL PETITION NO. 224 OF 2001, dated 16 August, 2007, the National
Consumer Disputes Redressal Commission (NCDRC) dealt with a case wherein the Consumer Protection
Council, Rourkela, a voluntary organisation, had filed a complaint against the Indian Oil Corporation Indane LPG
that the refill received by consumers was less than the represented weight. The NCDRC directed the Ministry of
Petroleum, as well as the Ministry of Consumer Affairs, to ensure that all marketing companies issue necessary
instructions and that the distributors will provide the delivery person with a proper weighing scale for the purpose
of weighing the LPG Gas Cylinder in the presence of customers. They are also required to give it due publicity
by publishing the same in the vernacular language of each and every State, and in English and Hindi in
newspapers, as well as providing a similar type of advertisement on TV for consumer information.

The NCDRC directed the Indian Oil Corporation to pay a sum of 50,000 rupees to the Complainant-Council to
meet the expenses incurred by it in protecting the interest of consumers, and to continue to protect the interest of
consumers, for a period of four weeks.

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4.5 How long does it normally take to get to trial?

In practice, a civil suit may take two to three years to get to the trial stage and another three years for final
disposal; while in a consumer forum, a typical case is disposed of within one to two years. Once the complaint
is received by the District Forum, the District Forum may either admit or reject a complaint, generally within 21
days from the date from receipt thereof. Once the complaint is admitted, the District Forum shall refer a copy of
the admitted complaint within 21 days from the date of its admission to the opposite party, directing it to give its
version of the case within a period of 30 days or such extended period (not exceeding 15 days) as may be granted
by the forum.

The Consumer Protection Act requires the District Forum to decide a complaint within a period of three months
from the date of receipt of the notice by the opposite party where the complaint does not require analysis or testing
of commodities, and within five months if it requires analysis or testing of commodities. Further, the Consumer
Protection Act prescribes that an appeal filed before the State Commission or the National Commission shall be
heard and finally disposed of within a period of 90 days from the date of its admission.

4.6 Can the court try preliminary issues, the result of which determine whether the remainder of the trial
should proceed? If it can, do such issues relate only to matters of law or can they relate to issues of fact as well,
and if there is trial by jury, by whom are preliminary issues decided?

The court may decide matters on preliminary issues such as res judicata, limitation periods, or other legal
grounds. Courts will not assess facts at preliminary stages before trial.

4.7 What appeal options are available?

Action under the Consumer Protection Act, 1986

Any person aggrieved by an order made by the District Forum may refer an appeal against such order to the State
Commission within a period of 30 days from the date of the order. Provided the appeal is referred by a person
who is required to pay any amount in terms of an order of the District Forum, the appeal shall be entertained by
the State Commission only if the appellant has deposited in the prescribed manner 50 per cent of that amount or
25,000 rupees, whichever is less. (Section 15 of the Consumer Protection Act, 1986.)

Any person aggrieved by an order made by the State Commission may refer an appeal against such order to the
National Commission within a period of 30 days from the date of the order. Provided the appeal is referred by a
person who is required to pay any amount in terms of an order of the State Commission, the appeal shall be
entertained by the State Commission only if the appellant has deposited in the prescribed manner 50 per cent of
that amount or 35,000 rupees, whichever is less. (Section 19 of Consumer Protection Act, 1986.)

Any person aggrieved by an order made by the National Commission may refer an appeal against such order to
the Supreme Court within a period of 30 days from the date of the order.

Provided the appeal is referred by a person who is required to pay any amount in terms of an order of the National
Commission, the appeal shall be entertained by the Supreme Court only if the appellant has deposited in the
prescribed manner 50 per cent of that amount or 50,000 rupees, whichever is less. (Section 23 of Consumer
Protection Act, 1986.)

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Action under civil courts

A suit is instituted in the lowest court competent to try such suit. An order or a decree passed by a district court
is appealable before the high court. An order passed by the high court is appealable to the Supreme Court, which
is the apex court.

4.8 Does the court appoint experts to assist it in considering technical issues and, if not, may the parties
present expert evidence? Are there any restrictions on the nature or extent of that evidence?

Experts may be appointed by courts or consumer forums, depending upon the facts and circumstances of each
case.

However, the case should be complicated enough to require the opinion of an expert. As per Section 45 of the
Indian Evidence Act, expert testimony is possible, but generally cross-examination does follow. The expert
testimony or opinions should be limited only to highly technical points.

4.9 Are factual or expert witnesses required to present themselves for pre-trial deposition and are witness
statements/expert reports exchanged prior to trial?

Generally, in product liability cases, expert opinions are not taken, except if the court thinks it is necessary to
determine important facts. Depositions, reports, and cross-examination all take place during the trial.

4.10 What obligations to disclose documentary evidence arise either before court proceedings are commenced
or as part of the pre-trial procedures?

In Indian law, it is for the party claiming a relief to supply to court all documents upon which it relies. The court
may also entertain applications seeking relief of discovery or production of records depending on the facts of
every case. In Ramrati Kuer v Dwarika Prasad Singh & Ors., AIR 1967 SC 1134, this court held:

―It is true that Dwarika Prasad Singh said that his father used to keep accounts. But no attempt was made on
behalf of the appellant to ask the court to order Dwarika Prasad Singh to produce the accounts. An adverse
inference could only have been drawn against the plaintiffs-respondents if the appellant had asked the court to
order them to produce accounts and they had failed to produce them after admitting that Basekhi Singh used to
keep accounts. But no such prayer was made to the court, and in the circumstances no adverse inference could
be drawn from the non-production of accounts.‖

4.11 Are alternative methods of dispute resolution required to be pursued first or available as an alternative to
litigation e.g. mediation, arbitration?

Parties to a contract may agree to adopt alternative means of dispute resolution (ADR) in their contract before
resorting to litigation.

Such means could be negotiation, mediation or conciliation or other forms of ADR. Such contractual terms are
binding on the contracting parties. In India, courts encourage settlement of disputes through ADR.

Alternative means of dispute resolution are not generally adopted in product liability cases wherein the consumer
is aggrieved. Statutory forums, such as consumer forums, decide such cases.

50
 In what factual circumstances can persons that are not domiciled in your jurisdiction, be brought within the
jurisdiction of your courts either as a defendant or as a claimant?

The Consumer Protection Act can be applicable to a foreigner who avails service or purchases a product from
India, as it does not limit its application to only Indian citizens. As a defendant, a plaintiff can file an action in
Indian courts against a foreign service provider or manufacturer if he provides a service or sells goods in
India. This judgment obtained by a plaintiff can be enforced in India if the defendant has any assets in India or
enforced abroad if a reciprocal arrangement exists with the government/country in question. In case a judgment
is passed by an Indian court, by virtue of Section 38 of the Code of Civil Procedure, a decree may be executed
either by the court which passed it or by the court to which it is sent for execution. According to Section 51 of
the Code of Civil Procedure, an execution order may entail delivery of any property specifically decreed or
attachment and sale of any property, by arrest and detention in prison, by appointing a receiver, or other manner
as the court may deem fit.

TimeLimits
5.1 Are there any time limits on bringing or issuing proceedings?

In an action under the Consumer Protection Act, the District Forum, the State Commission or the National
Commission shall not admit consumer complaints unless they are filed within two years from the date on which
the cause of action has arisen.

Whereas, in an action under the Indian Contract Act, Sale of Goods Act and other applicable statutes, a person
will not be able to initiate a product liability claim after three years from the date of which the cause of action
(product defect) which gives the right to initiate a product liability claim occurs.

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 Findings

 Product liability insurance protects against claims of personal injury or property damage caused by
products sold or supplied through your business. It is designed to help protect your business by ensuring
that if this happens, you don‘t have to pay any legal or court costs.
 Product liability insurance is recommended for any business that supplies products. Even with products
that appear entirely safe, there‘s always the potential for something to go wrong – and accidents do
happen.
 Product liability insurance is recommended for any business that supplies products. Even with products
that appear entirely safe, there‘s always the potential for something to go wrong – and accidents do
happen.
 PLI covers two types of torts in potential legal actions:

 Bodily injury: In the event that somebody is wrongfully injured by your product, PLI can cover the cost
of care, lost wages, restitution for death or legal fees if you‘re taken to court
 Property damage: In the event that property is damaged due to your product, PLI can cover the value of
physical damage, repairs, lost profit due to damages and legal fees if you‘re taken to court

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 Case Study
A Missouri trial court judge has affirmed the massive $4.69 billion verdict against Johnson &
Johnson (JNJ.N) in a case involving 22 women and their families who alleged the company‘s talc-
based products, including its baby powder, contain asbestos and caused them to develop ovarian
cancer. J&J in a statement on Wednesday said it would continue to pursue all available appellate
remedies. The company, which denies the allegations and says its talc is safe, previously said it
was confident the verdict would be overturned on appeal.In a series of orders on Tuesday evening,
Judge Rex Burlison of the Circuit Court of the City of St. Louis affirmed the jury‘s July 12
decision in favor of the women, six of whom have died.―The Court finds there is no just reason
for delay and hereby certifies this judgment as final for purposes of appeal,‖ Burlison wrote in the
judgments.Defendants in civil cases can generally file so-called post-trial motions, asking the trial
court judge to reduce a verdict or set it aside entirely, but J&J did not file such motions. It can
now take up the cases with a Missouri appeals court.The jury found the company‘s talc-based
products had caused the women‘s cancer, awarding $550 million in compensatory damages and
$4.14 billion in punitive damages to all plaintiffs.Mark Lanier, a lawyer for the women, in a
statement on Wednesday said he was confident the judgment would be upheld on appeal.―We
hope this judgment will compel Johnson & Johnson to take responsible, effective action in
acknowledging the inherent dangers of the use of talc, and specifically the use of Johnson‘s Baby
Powder and similar products,‖ Lanier said. The verdict was the largest to date arising from
lawsuits alleging products like J&J‘s Baby Powder cause cancer. The company faces some 10,600
cases nationwide over talc, according to an August regulatory filing.

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 Conclusion

Despite the non-homogeneity of the levels of development within Asia, the development of a product liability
regime is inevitable. It is unmistakable that legislators and courts in Asia are becoming increasingly
sophisticated. Naturally, this will result in a gradual push towards more stringent regulation and establishment
of enforcement mechanisms to better protect consumers and reduce the instances of safety scandals. Given the
development of ASEAN as a potential trading bloc, it is hoped that product liability laws, or indeed consumer
protection legislation that address product liability, be promulgated in consultation with each other such that the
same basic principles of product liability and the protection of the consumer be consistent. In that regard, it may
itself form a model that takes into account the cultural and political diversity in the region. This could very well
cause other countries in the Asia Pacific to look carefully at such legislation for use in their own jurisdictions. If
this can be achieved, other non-ASEAN members in the region might be interested in either following the model
or taking parts of it that would be useful in their country.

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 Questionnaire

1. What does the term product liability mean?

2 .If I am injured or a loved one is killed by a defective product, against whom can I make a claim?
3. What must be proven in a product liability case?

4. What if the product that injured me is old?

5. What damages can I recover in a defective product case?
6. When is a manufacturer liable for injury caused by a defective product?

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 Bibliography/Reference

www.google.com

www.wikipedia.com

www.google.co.in

www.primeins.com

http://iclg.com

https://product-liability-laws-and-regulations

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