Product Liability Insurance – Will Your Insurance Programme ‘Fail To Perform?’

By Mark Philmore
Defence helicopter faces the sun.

Product Liability Insurance is increasingly recognized as an essential form of insurance protection to those firms supplying technology in connection with defence projects. Indeed, contractual requirements increasingly place an obligation on firms to have ‘adequate’ Product Liability cover.

To clarify, Product Liability Insurance provides firms with cover in respect of their legal liability for death or bodily injury to third parties or damage to their property as a result of the supply or manufacture of their product.

What is adequate Product Liability cover?

More often than not, the issue as to what is ‘adequate’ Product Liability Insurance cover is driven by a monetary limit in the contract rather than by any significant review of the scope of cover provided by the policy wording. As a result, what is deemed ‘adequate’ from a monetary point of view may be sorely inadequate when the finer detail of the policy wording is scrutinised.

‘Efficiacy Exclusion’

In particular, many UK insurance policies will contain an ‘Efficacy Exclusion’ or, as it is sometimes known, a ‘Failure to Perform Exclusion’, which may render many insurance contracts practically worthless; such exclusions remove any cover in respect of legal liability for third party injury or property damage resulting from the failure of your product to perform its intended function.

It is not difficult to appreciate that such restrictions may remove cover altogether for a significant proportion of a firm’s product liability risk; many of these exclusions effectively limit cover in respect of injury to, for example, liability for injuries sustained whilst handling the product itself (and not resulting from the failure of the product to perform its function).

Risks of Efficiacy Exclusion

Although this may make the risk more attractive to insurers, this is not providing firms in your sector with the cover they need.

As a result, if you are a firm that supplies or manufactures products for defence environments, often with safety critical implications, you could be left exposed to significant uninsured financial liabilities, which could jeopardize the survival of your business. Consequently, we would strongly recommend that you check the scope of your Products Liability Insurance as soon as possible.

MFL’s S&T Bespoke Solution

If your current cover is inadequate, or you would simply welcome a second opinion, we are pleased to advise you that specialist insurance brokers, MFL Science & Technology (an NDI Member), has its own bespoke solution for businesses supplying technology to the defence sector, which includes full efficacy cover.

For further information please contact:

 Mark Philmore

MFL Science & Technology Insurance Brokers

Suite 503, 2 Wellington Place, Leeds LS1 4AP

DDI 0113 366 2359


MFL Science & Technology is a trading name of McParland Finn Ltd.
Registered office Barlow House, Minshull Street, Manchester M1 3DZ.

Registered in England No. 2817700.
McParland Finn Ltd is authorised and regulated by the Financial Services Authority.

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