What Is Product Liability?

Under the Consumer Protection Act 2019, manufacturers, distributors, and sellers are jointly and severally liable for any harm caused by a defective product. This includes physical injury, property damage, and even mental anguish caused by defective goods. The Act allows class action lawsuits and punitive damages.

Who Needs Product Liability Insurance?Food & Beverage manufacturers: Contamination, allergens, packaging defects.Pharmaceutical companies: Side effects, wrong dosage, labeling errors.Electronics/appliance makers: Electrical fires, battery explosions, short circuits.Automobile companies: Brake failure, airbag defects, tire blowouts.Toy manufacturers: Choking hazards, toxic materials, sharp edges.Cosmetics/personal care: Skin reactions, chemical burns, allergies.E-commerce sellers & importers: Joint liability for products sold on their platform.What Product Liability Insurance CoversCoverageDetailsTypically Included?Bodily Injury ClaimsMedical costs, disability, death caused by product✓Property DamageThird-party property damaged by defective product✓Legal Defense CostsLawyer fees, court costs, expert witnesses✓Recall ExpensesCost of product recall from marketAdd-onLoss of ReputationPR/crisis management costsAdd-onFinancial LossesPure economic losses to buyersVaries⚠ Wake Up Call: The Consumer Protection Act 2019 introduced product liability as a standalone cause of action. No need to prove negligence — strict liability applies. If your product is defective and causes harm, you pay. Period. Even e-commerce platforms face liability.Premium Factors

Product liability premiums depend on: Product type (food/pharma = higher risk), annual turnover, export markets (US/EU exposure = much higher), claims history, quality certifications (ISO, BIS reduce premiums), and coverage territory. Typical rates: 0.1-0.5% of annual turnover for domestic cover, 0.5-2% for US/EU cover.

Frequently Asked QuestionsDoes product liability cover product recalls?

Standard policies typically exclude recall expenses. You need a separate Product Recall Insurance add-on. Recall costs include consumer notification, product retrieval, disposal, replacement, and reputation management — often exceeding the original liability claim.

Do retailers/distributors need product liability insurance?

Yes. Under the Consumer Protection Act 2019, the entire supply chain — manufacturer, distributor, and seller — is jointly liable. A retailer can be sued even if they didn't manufacture the product. Smart retailers require manufacturers to provide indemnity coverage.

Product Liability Insurance India: Protect Your Business from Consumer Lawsuits

By Admin • Feb 23, 2026 • 📖 2 min read • ✅ Updated Feb 24, 2026

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Admin

Insurance & financial content specialist at PolicyBaazar. Helping Indians make informed insurance decisions with expert analysis and unbiased reviews.

📅 Published: Feb 23, 2026 🔄 Updated: Feb 24, 2026 📖 412 words ⏱️ 2 min read

Product Liability Insurance India: Protect Your Business from Consumer Lawsuits

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