Why Is Professional Liability Insurance Important In Manufacturing?


In manufacturing, it is essential to protect your business, professional integrity and yourself.

Typically, manufacturers will prioritise product liability insurance. However, professional liability, also known as professional indemnity insurance can be just as important in manufacturing.

What is professional liability insurance?

Professional liability insurance, or professional indemnity insurance, is designed to protect individuals and businesses from the risks of mistakes with advice or expertise. Professional liability insurance means that is clients or customers claim that a business provided faulty services or poor advice or mistaken expertise, then the organisation can cover the cost of legal fees. The insurance will also include the necessary compensation that you may need to pay the client for the claim that they have made against you.

What is manufacturers’ professional liability insurance?

Manufacturers professional liability covers the manufacturing business for any professional services that could mean that a third party suffers a financial loss.

In regards to the manufacturing industry, professional liability insurance can help to cover issues from primary product manufacturing to components manufacturing. It can include domestic end products or industry and commercial equipment.

Some typical aspects of manufacturers’ professional liability insurance include coverage for multimedia, marketing and advertising as well as privacy liability and data security. Other manufacturing liability insurance covers elements such as pollution liability.

What’s included in manufacturers’ professional liability insurance?

Professional liability insurance typically covers the ‘intangible’ aspects of manufacturing rather than the tangible goods and assets of the business. Usually, advice, projections and expertise mistakes will be included.

Should a client, customer or third-party make a claim against your professional services, then professional liability insurance will support the cost of your legal defence and expense. This will help should you have to defend yourself in court.

The insurance cover will also help to pay any compensation that is required for the customer or third party. This compensation will be awarded if a client wins their case against you. Furthermore, the client will also be compensated for the money that they have lost as a result of your advice or mistakes if they win the case.

Some professional indemnity will also include run-off insurance. Run-off insurance will help to cover you for future claims and cases that crop up after your firm ceases operations. If you close the business, run-off insurance will ensure you have support should you need financial assistance for claims made against you in the future.

What isn’t included in manufacturers’ professional liability insurance?

There may be cases where a customer, client or third party makes a claim against you that is based on tangible issues. A common area for this in manufacturing is when a client makes a claim of product liability. If the product you have manufactured causes injury or damages property, then you could be liable. While professional liability insurance will not cover you, product liability insurance will.

Other insurance that you may need as a manufacturer is public liability insurance, to cover damage or injuries as a result of your work. If you have employees in your manufacturing business, then it is a legal requirement for you to have employers’ liability insurance too.

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Do I need manufacturers’ professional liability insurance?

Many sectors explicitly require professional liability insurance such as accountants and solicitors. Many manufacturing businesses do not realise that they may need professional liability insurance as well as product liability. However, many claims could affect almost any industry which include;

  • Breach of copyright

If you accidentally use an individual’s intellectual property, you could break copyright law, and a claim could be made against you.

  • Confidentiality breach

If you share or expose information that is confidential for a client or third-party, then you may be sued as a result.

  • Libel

If someone considers something you have said or done is defamatory about them and is a lie, then there may be a case for libel and slander made against you.

  • Loss of information

If you accidentally lose data, documents or information, then trade secrets or financial information may be exposed, and you may be sued for the financial loss.

  • Negligence

If you make a mistake while completing work for a client which results in financial loss, then you may be sued as a result.

  • Loss of goods or finances

If you have been entrusted with protecting goods or money and you lose them, then you could face a claim against you.

Depending on the size of your manufacturing business, insurance providers will determine the level of professional liability insurance that you would need to defend yourself in court. Make sure you state the size of your clients and your business when searching for a quote for professional liability insurance.

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