LIABILITY POLICIES WITH SPECIAL REFERENCE TO PRODUCT LIABILITY POLICY
This policy covers all sums (inclusive of defense costs), which the insured becomes legally liable to pay as damages as a consequence of:
- Accidental death/ bodily injury or disease to any third party.
- 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.
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:
- 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.