Public liability covers injury or property damage caused by your business activities, such as a customer slipping in your shop or an installer cracking a client’s tiles. Product liability covers injury or damage caused by goods you made, imported, sold or repaired once they have left your hands. In Australia the two are usually written as sections of one liability policy, so the real question in product liability vs public liability is whether the product side of your business has been declared and rated properly.
Where the harm starts decides which section responds
Take a cafe. A customer slips on a wet floor at the counter: that is public liability, because the injury came from the way the premises were run. The same customer takes a sandwich home and falls ill that night: that is a products claim, because the harm came from goods that had already left the cafe. Same business, same customer, two sections of the policy.
The line is custody and control. While the goods are on your premises or in your hands, most wordings treat an incident as part of your business activities. Once they are sold, delivered, installed or handed back after a repair, they become your products for insurance purposes, and the products section takes over.
Government guidance blurs the two on purpose. business.gov.au lists food making a customer sick as an example of what public liability may cover, and says product liability insurance may be needed if you make, sell or supply goods, even in the form of a repair or service. The overlap is the reason most Australian insurers sell both inside a single public and products liability policy.
One policy, two limits that behave differently
The schedule usually shows one figure for each section, commonly 10 million or 20 million dollars. The figures can match while the limits work in different ways.
- Public liability is commonly a limit for any one occurrence. Two separate accidents in the same year each have the full limit available.
- Products liability is commonly an aggregate limit for the period of insurance. Every products claim in that year draws on the same pool, so one faulty batch that injures several people can use it up.
Rating differs too. The public side is priced on your trade, premises and wages. The products side is priced on what you sell, how much of it, where it goes and who made it. A business that started as a service and grew a product line often still has the old description on the schedule.
Retailers and importers: whose product is it?
Selling a product you did not make does not keep you out of the chain. The ACCC’s guidance on product safety responsibilities states that sellers must give a refund or replacement where a product they sold to a consumer has a safety issue, and must not send the consumer to the manufacturer instead. Where the fault is a manufacturing defect, the ACCC says the seller is entitled to be reimbursed by the manufacturer.
Compensation for injury or loss is a different step. The ACCC states that the manufacturer or importer is generally liable to pay it, but that the seller may be liable if it cannot identify the manufacturer or importer. For a shop buying through a local wholesaler, that usually points the claim up the chain. For a business that imports direct from an overseas factory, the importer is often the first Australian party a lawyer can reach.
Three habits put a retail shop or online seller in a stronger position:
- Keep supplier names, invoices and batch or model numbers for every line you stock.
- Ask local suppliers for a certificate of currency showing their products liability.
- Tell your insurer when you start importing, or when goods go out under your own brand name.
What the products section will not pay
A products liability claim is about injury to people or damage to someone else’s property. Much of what goes wrong with a product falls outside that. Common exclusions include:
- The refund or replacement owed to the customer under the consumer guarantees.
- The cost of repairing or replacing the faulty product itself.
- Recall costs, which need their own cover.
- A product that simply fails to do what you promised, where nobody is hurt and nothing else is damaged.
- Defects you knew about before the goods went out.
- Liability you take on by contract beyond what the law would impose.
- Sales into countries excluded on the schedule, often the United States and Canada unless declared.
The reporting deadlines run whatever the policy says. The ACCC states that a business going ahead with a voluntary recall must notify the responsible Commonwealth Minister within 2 days, and that anyone in the supply chain who becomes aware of a serious injury, illness or death associated with a product must report it within 2 days. Retailers, wholesalers, importers, manufacturers, installers and repairers are all named. Tell your broker at the same time you tell the regulator.
What to declare so the product side holds up
Most disputes over products claims trace back to the proposal form. Before renewal, check that the insurer knows:
- Everything you make, assemble, import, relabel, sell, install or repair, including lines added mid year.
- How much of your turnover comes from imported goods and from goods sold under your own brand.
- Where your goods end up, including online sales shipped overseas.
- Whether any product must meet a mandatory safety standard.
- Any supply agreement where you indemnify a retailer or distributor.
For a factory or food producer, product liability vs public liability is the smaller half of the picture. Plant, stock, recall and lost production sit around it, as our manufacturing insurance page sets out. For a shop, trade or office, the liability policy usually sits inside a wider business insurance package with property and interruption cover.
What FRS does: we read the definition of products and the exclusions in your liability wording, compare them with what you actually sell and where it goes, and correct the business description before a claim tests it. Where you import, sell under your own brand or export, we place the products section with an insurer that writes that risk, and we arrange recall cover separately when your contracts or your product call for it.
For limits, wordings and certificates, start with our public liability insurance page.
Frequently asked questions
Is product liability included in a public liability policy?
Usually, yes. Most Australian insurers write public and products liability as two sections of one policy, each with its own limit shown on the schedule. The products section only responds properly if the insurer knows what you make, import or sell, so check that the business description matches your current product lines.
Do I need product liability if I only resell goods?
In most cases, yes. The ACCC states that sellers must provide a refund or replacement for products with a safety issue, and may be liable for compensation if they cannot identify the manufacturer or importer. A reseller with good supplier records carries less risk than an importer, but the products section still matters.
Does product liability insurance pay for a product recall?
Generally not. Products liability pays for injury to people and damage to other property caused by your goods. The cost of withdrawing, replacing or destroying the goods themselves is commonly excluded and needs separate product recall cover. The ACCC states that a voluntary recall must be notified to the responsible Commonwealth Minister within 2 days.
Why does my products limit run out faster than public liability?
Because it is commonly an aggregate limit. The public liability limit usually applies to each occurrence, while the products limit is often shared by every products claim in the period of insurance. One faulty batch that injures several customers can draw down the whole amount, so the figure deserves a closer look.
Questions about your own cover? Call 03 7046 3766 on weekdays between 9:30am and 6pm, or send us an enquiry.
