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Why do producers, contractors and service providers need liability insurance?

If the customer is a producer, importer, distributor, supplier, repair or installation contractor and is generally involved in any part of the product life cycle, there is a possibility of being held liable for product quality. Even if it is later found that someone else is to blame, the customer may still incur substantial legal costs in a law suit. 

Consumer protection laws in many countries establish absolute liability (without fault) for product quality without much potential for protection. For example, under Article 1095 of the RF Civil Code, damage to a person’s life, health or property, or a legal entity's property due to defects in the design or contents of a product, contractor error, or inaccurate or insufficient information about a product or service must be compensated by the seller or manufacturer of the good, or the person who performed the work or rendered the service, regardless of whether or not he or she is guilty and whether or not the victim was in a contractual relationship with them. Furthermore, any victim of harm caused by a defective product must be compensated, at the option of the injured, by the seller or manufacturer (i.e., anyone who owns the product in the distribution chain). 

Even those who maintain good quality control, comply with occupational safety and health standards and use appropriate product quality testing methods can be held liable for damage to the life, health or property of third parties:

  • Companies you do business with may insist that all contracts have an insurance clause (for example, if you are an exporter) 
  • Claims of poor product quality in foreign countries often involve litigation under different legal regimes with unclear legal consequences, and payouts can be much higher than in Russia. For example, it is well known that product defect lawsuits in the United States or Canada can entail not only an obligation to compensate for damage, but also penalties that can be many times larger than the magnitude of the damage 
  • Manufactured products have differing useful lives or shelf lives and can be re-exported or sent anywhere in the world, which means that lawsuits can be filed anywhere in the world even many years after the product is sold 
  • Protecting your company’s financial performance for the year: budgeted cost of insurance or the probability of sudden and huge uninsured losses. Defending yourself from a class action suit can be very costly 
  • Losses occur even in companies with effective corporate governance 

Features and Benefits

Service providers’ liability insurance includes protection of the customer’s property interests in respect of work that is performed or services that are provided by the customer, but can still cause harm to the life, health or property of third parties. This type of insurance is different from general liability insurance, which arises during production or service provision. Therefore, customers who purchase only general liability insurance risk incurring uninsured losses in the event they occur after the entire job is completed or service is provided. 

Standard insurance coverage extends to third party liability and legal costs, while optional additional coverage includes product recall insurance  and insurance against financial losses.

Our advantages

  • We work in all sectors, including energy, construction, oil and gas, the food industry, chemical manufacturing, real estate, etc. 
  • We have sufficient resources to provide a large volume of financial capacity (limits of liability up to US$100,000,000 or the equivalent in Russian rubles at the Central Bank’s rate on the day when the contract is signed) in Russia without the need for facultative reinsurance from other reinsurers 
  • AIG operates in 100+ countries and jurisdictions and provides fast settlement services in all of them, whether you’re a transnational corporation or a small or medium-sized business operating in a single country 
  • Financial stability 
  • International experience 
  • Flexible and individual approach 
  • We can issue a single insurance policy covering general liability, product liability, contractor’s liability, service provider’s liability and employer’s liability 
  • We issue policies in both Russian and English, allowing you to quickly negotiate the wording of insurance contracts with companies that require them 
  • You can acquire supplementary product recall coverage, which covers you against cases when your product causes harm to the life, health or property of third parties or threatens to cause such harm 

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