If you sell any products to the public you will have some liability for those products. Obviously, some goods have the potential to cause more harm than others. It is difficult to see how postcards could cause consumers any harm but pencil sharpeners with loose blades, flammable tea towels, electrical goods and anything that could be a choking hazard can create risk and it is always helpful to know what the risks are and how your liability can be managed.

What does product liability mean?

Under English law, if a product is “defective” and the defect causes any damage to a consumer (meaning harm to their body or their property), the consumer will be entitled to bring a claim under the Consumer Protection Act 1987. There are some limited defences but the most important thing to note is that no contract term or notice will limit a consumer’s right to bring a product liability claim.

Who is liable for a defective product?

The producer (manufacturer) is always liable but if the product is branded the brand owner will also be liable along with the manufacturer. If a defective product has been imported from outside of the EU for the purpose of onward selling, the importer will also be liable. If the consumer does not know who is liable the retailer from whom the product was bought must provide this information within a reasonable time period.

What liability does a retailer of third-party-branded product have?

Separate from a product liability claim, or a negligence claim, a consumer has the right to bring a claim against the retailer of any product under the Consumer Rights Act 2015 if the goods are not “satisfactory”, they are not fit for their purpose or they do not match their description. Again, no contract term or notice will limit a consumer’s right to bring this sort of claim.

What can retailers do to reduce the risk or the impact of a claim?

In order to reduce the risk and impact of a claim retailers should consider:

  • Full due diligence on manufacturers including financial due diligence on their assets and what product liability insurance they have in place;
  • Warranties and indemnities from manufacturers and exporters so that you can recover damages through the contract; and
  • Securing your own product liability insurance.
What will product liability insurance cover?

The answer to this question all depends on what you can negotiate and what you can afford. Policies can cover the following but not all will so you need to check the fine print:

  • The damage suffered by the consumer;
  • The costs of a product recall (which can be considerable); and
  • Directors/officers’ liability (for negligence).

Consider what goods you sell, what could go wrong with them and what your liability would be if they were defective. If you could end up with significant costs in the event of a disaster, consider insurance. You should certainly have product liability insurance in place if you manufacture your own product or you sell or licence your own branded products. Remember that you could also suffer significant brand/reputation damage in the event that you are found to have sold defective products. It is possible to secure reputation insurance but it is usually very expensive to do so. If you find yourself in the situation where you have sold defective product, make sure you escalate the claim as far up the management chain as possible and try to involve your PR and Communications team (if you have one). Finally, if you do have product liability insurance in place make sure that you speak to your insurers as soon as any problems arise. Insurance policies can be invalidated if you take inappropriate action without their approval.

Anthony Misquitta
By Anthony Misquitta
Anthony Misquitta is a Trustee of the Association for Cultural Enterprises, the General Counsel at the Victoria and Albert Museum and a Consultant Solicitor at Keystone Law.
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