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Product liability insurance covers your legal liability when a product you make, import, sell, supply, install or repair injures someone or damages their property. It pays the compensation you are found liable for and the legal costs of defending the claim, up to the policy limit. In Australia it is usually sold together with public liability as a single "public and products liability" policy.
You don't have to manufacture anything to need it. Under the Australian Consumer Law, a business that imports goods from a maker with no office in Australia is treated as their manufacturer, and retailers and wholesalers can still be drawn into injury claims. What product liability does not do is pay to recall, repair or replace the faulty product itself; that is a separate cover.
By Better Rate Mate Editorial Team ยท Last reviewed
A products liability section responds when a product has left your hands and then causes harm. Typical examples:
The Australian Consumer Law, which the Australian Competition and Consumer Commission (ACCC) enforces, lets a consumer seek compensation from a manufacturer that supplied a product with a safety defect. The ACCC explains that a product has a safety defect if it doesn't meet the level of safety the public is generally entitled to expect. That liability does not depend on a contract with the injured person.
The law's definition of manufacturer reaches further than the factory. The ACCC's product safety guidance says a manufacturer includes a business that imports goods when the maker does not have an office in Australia. So an online seller or small retailer that sources directly from an overseas factory can be the manufacturer in law, with no Australian company standing between the customer and them.
Retailers and wholesalers of Australian-made or locally imported goods are less exposed under those provisions, but they can still be named in a negligence claim or in a claim where the maker is hard to pin down. Keeping clear records of who supplied every product is part of managing that risk.
| Your role | Exposure | Why |
|---|---|---|
| Manufacturer in Australia | High | Directly liable for safety defects under the Australian Consumer Law |
| Importer of goods from a maker with no Australian office | High | Treated as the manufacturer under the Australian Consumer Law |
| Wholesaler or retailer | Lower, but real | Can be joined in negligence claims, and needs supplier records to point to who made or imported the goods |
| Installer or repairer | Real, for your work | Claims arising from goods you fitted or repaired after the job is complete |
The most common gaps, and the cover that fills them where one exists. Injury to your own staff is a workers compensation matter, and paid advice or design work is covered, if at all, by professional indemnity.
| Not covered | Where to look |
|---|---|
| Recalling, repairing or replacing the faulty product itself | Product recall insurance (a separate policy) |
| The cost of redoing your own defective workmanship | Usually uninsured; some trade policies offer limited extensions |
| Financial loss from a product that simply doesn't work, with no injury or damage | Usually not insurable under liability cover; manage through contract terms |
| Injury to your own employees | Workers compensation |
| Advice or design you are paid for, as opposed to the product | Professional indemnity |
| Products exported to the United States or Canada | Often excluded or needing specific declaration and a higher premium |
| Liability you accept under a contract beyond what the law would impose | Negotiate the contract, or ask the insurer to note it |
Public liability limits are usually per occurrence: the limit applies to each separate event, however many events there are in the policy year. The products section is different. It is commonly subject to an aggregate limit, which is the most the insurer will pay for all products claims during the period of insurance combined.
That matters for a business whose one faulty batch could hurt many customers. A $10 million products aggregate is shared by every claim that year, so check whether defence costs are paid inside or on top of it, and whether a batch-clause treats all claims from one defect as a single occurrence.
The ACCC sets out two deadlines every product business should know. If a consumer product is associated with a serious injury, illness or death, the supplier must report it within 2 days of becoming aware of it. And a business that starts a voluntary recall must notify the responsible Commonwealth Minister within 2 days. Recalls can also be ordered by government. Product liability cover responds to the injury claims; the costs of getting the product back off shelves and out of homes sit with recall cover or with you.
Insurers price products liability on what you sell, where it's sold and how much of it. Give every insurer the same description and figures:
Public liability covers injury or property damage caused by your business activities, such as a customer slipping in your shop. Product liability covers injury or damage caused by a product you supplied after it has left your hands. They are usually sold together as public and products liability.
Not generally. No law requires most businesses to hold it, but retailers, marketplaces, distributors and landlords often make it a condition of stocking your products or leasing you space.
Often, yes. A reseller can still be named in a negligence claim, and if you import directly from a maker with no office in Australia, the Australian Consumer Law treats you as the manufacturer. Many retailers and marketplaces also require suppliers to hold it.
No. It covers injury and property damage claims caused by the product. The cost of recalling, repairing or replacing the product is covered, if at all, by separate product recall insurance.
It depends on what you sell, how much you sell, whether you make or import it, where it's sold and the limit you choose. Riskier goods, such as electrical items, food, cosmetics and children's products, cost more to cover. Get quotes using the same product description, turnover split and limit so you're comparing like for like.
If you import directly from overseas manufacturers, you may be legally treated as the manufacturer, which is exactly the risk product liability covers. Many online marketplaces and retail partners also require sellers to hold it.
This page explains how product liability insurance and the Australian Consumer Law generally work. It is not legal or insurance advice for your business. Read the Product Disclosure Statement before you buy, and get legal advice about your obligations as a manufacturer or importer.
