Factoring Companies Guidebook
Product Liability Insurance
Definition
Insurance against any liability in the form of damages or compensation arising from, or in connection with, the client's product or services e.g. sickness as a result of eating contaminated food, injury as a result of faulty equipment, or loss of business due to faulty equipment or installation.
Concerns
Where a claim for compensation is made this could affect the client's ability to continue trading and while there will also be a dispute on the particular debt which will lead to non payment, the extent of the claim may be so substantial as to cause the business to fail. In such cases, product liability insurance may be the only method of us receiving payment.
Identification
Review the Client's insurance policy in order to ascertain its adequacy in respect of the following points:-
- Level of cover
- Number of claims made over a specific period
- Due dates of premiums.
Also consider the Client's quality control procedures which may be indicative of the likelihood of claims arising. Enquire as to any potential future claims.
Treatment
Establish the adequacy of the cover to ensure it is kept up to date. If the cover is found to be inadequate the Client should be encouraged to increase it. Also check to see if this was a condition of sanction and if so, report the findings accordingly.
