As one of the most important production bases, China creates a growth environment with both opportunities and risks for the companies all over the world. The way of examining and managing product distribution risks will affect a company’s sustainable development to a large extent.

Manufacturing a product and finding sales channels are only the beginning of the business story. No matter where the companies sell their goods---North America, Europe, Australia, Asia, or domestically in China, local laws will require the companies to be responsible for the injury or damage caused by the products.

In today's international market, consumers are paying more and more attention to protecting  their rights and interests. They know how to use legal weapons to file product liability claims or lawsuits against the manufacturers and distributors. In today’s trading and legal environment, one single claim or lawsuit can bring the company financial pressure and may even lead to financial crisis.

Causes of Product Liability

The major causes for product liability include:

• Design defects
• Manufacturing errors
• Improper instructions

Every product in the market has known or unknown exposure. Today's court decisions are imposing more and more responsibilities to the manufacturers and distributors. Further, in countries of strict liability, a lawsuit may appear out of the blue even if the product has no defects. Despite being aware of their innocence, manufacturers and distributors still have to allocate tremendous manpower and resources to resolve the disputes.

Product Liability Insurance

Purchasing product liability insurance is one of the easiest and safest ways for manufacturers and distributors to transfer these risks, and it has been a basic guarantee for companies in developed countries. When a third party files claims or lawsuits because of the injury or damage arising out of the product insured, the insurer will pay the amount of compensation and legal costs according to the policy. Manufacturers and distributors can pass on most of the risks to a known and predictable budget, thereby reducing  worries for future problems in  market exploitation.

Typical product liability insurance includes coverage for:

1. Bodily Injury, including medical expense, recovery expense, etc.
2. Property damage, including repair expense, replacement expense, etc.
3. Defense costs, including investigation expense, attorney fee, etc.
4. Additional costs, including interests of compensation, loss of income, etc.

Under the requirement of the applicant and with the consent of the insurer, product recall expense, including advertising, storage, transportation, disposal, repair, removal and installation costs, can be included in the extended coverage of the product liability insurance.

Marsh can help

As the world’s leading insurance broker and risk advisor, Marsh has provided service to Chinese clients for nearly thirty years. Marsh’s product risk professionals help companies understand their risk profile, identify emerging risk trends, and design solutions to protect and enhance their enterprise value.

Marsh has clients in multiple industries, including but not limited to:

• Automobile
• Life Science
• High-Tech
• Medicine
• Food
• Chemical Industry
• Heavy Industry
• Home Electrical Appliance
• Power Tools
• Toys
• Retail Industry

Marsh’s product risk services include:

• Insurance broking, including consultancy and placement on product liability insurance, product recall expense insurance, errors and omissions liability insurance, etc.
• Risk consulting, including risk quantification analysis, supply chain risk management, product recall risk management, company brand and crisis management, etc.
• Assisting claims handling, including claims consulting, supervision and management on claims handling procedure, etc.

Marsh’s product risk service team and experts are located in various countries around
the world. Through strong service network, Marsh can seek better risk solutions in the global insurance market, and provide powerful assistance in local claims handling.