Product liability & limited liability

[rcx690]

Hello,

New here. I found this forum when I was looking something up and it looks like a good place to get answers to some difficult questions.

I wanted to ask about product liability and how this relates to a company's limited liability. I understand that a company's limited liability has some limitations, from what I read it's mostly when a director knowingly does something wrong. I wanted to know whether product liability is also something that isn't limited by a company's limited liability? For example if a product becomes faulty and injures someone.

I appreciate that companies should have product liability insurance, but lets say the company didn't have insurance, or the insurance doesn't pay out due to some violation of terms.

Thanks

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Accidentally put this thread in wrong category...

[des8]

Re: Product liability & limited liability

Company limited liability = liability for company debts is limited to the company and is not directly the liability of the directors or owners (shareholders). The company is a separate legal entity.

Products liability does not relate to the limited liability above. In effect it is unlimited, but pragmatically companies will insure for an amount they 1) can afford & 2) they believe will exceed any possible claim

DandO (directors and officers liability) is the liability of management, and is a personal liability usually insured by the company.

To comment on the query about insurers not meeting a claim, really need more info, but in theory the claimant should proceed against the company who subrogate to the insurers .
If claimant dissatisfied they sue the company

[rcx690]

Re: Product liability & limited liability

Company limited liability = liability for company debts is limited to the company and is not directly the liability of the directors or owners (shareholders). The company is a separate legal entity.

Products liability does not relate to the limited liability above. In effect it is unlimited, but pragmatically companies will insure for an amount they 1) can afford & 2) they believe will exceed any possible claim

DandO (directors and officers liability) is the liability of management, and is a personal liability usually insured by the company.

To comment on the query about insurers not meeting a claim, really need more info, but in theory the claimant should proceed against the company who subrogate to the insurers .
If claimant dissatisfied they sue the company

Thanks. My query is generic, so I don't have any info to give you about insurers not meeting a claim. But I can imagine scenarios where they don't. E.g. the company declares to insurers that they sell toys and then they sell a DIY tool, someone injures themselves, insurers say that they won't meet the claim as the business told them they only sell toys.

So I'm not clear from your information, if a Ltd company had a product liability claim made against them, in normal circumstances (i.e. no neglect) would the limited liability protect the officers?

[des8]

Re: Product liability & limited liability

Sorry for the delay in replying;
I actually wrote what follows on 9/07 but failed to hit the reply button

The "limited" in the company title protects the owners (shareholders)

If the company was not insured, the company would have to meet any successful product liability claim.
If the company could not meet the claim the creditor could possibly bring an action against a director or officer for a wrongful act, if he could identify which D or O was responsible

This is quite a complicated area of liability......
Has your query been raised to enable you complete an assignment perchance?

[rcx690]

Re: Product liability & limited liability

Has your query been raised to enable you complete an assignment perchance?

Do you mean, why am I asking? I have some inventions/home design products that I wanted to sell, they are all simple and safe, but in todays environment I wanted to get product liability insurance. I found that insurance companies wanted CE certification on each product before they would insure anything, something that is not feasible for a tiny business. So I wondered about using the Ltd liability as protection.

If the company could not meet the claim the creditor could possibly bring an action against a director or officer for a wrongful act,

Would that be if the director did a wrongful act? e.g. knew the product was potentially dangerous?

I'm actually in the process of getting a consultation with a legal specialist to help on this matter as well.

[des8]

Re: Product liability & limited liability

Wrongful acts include breach of trust, breach of fiduciary duty,error , neglect, misleading statements (almost anything really!)

If someone brings an action against a director for a wrongful act, the cost of a successful defence can be massive, and the claimant might not have the resources to pay the defence costs.

Would be interested to hear what you learn from your meeting...

I asked why you had raised the query, as originally it seemed to concentrate on theory and was a bit light on actual situation and we do occasionally get students posting assignment questions!

[rcx690]

Re: Product liability & limited liability

Wrongful acts include breach of trust, breach of fiduciary duty,error , neglect, misleading statements (almost anything really!)

If someone brings an action against a director for a wrongful act, the cost of a successful defence can be massive, and the claimant might not have the resources to pay the defence costs.

Would be interested to hear what you learn from your meeting...

I asked why you had raised the query, as originally it seemed to concentrate on theory and was a bit light on actual situation and we do occasionally get students posting assignment questions!

I will try my best to remember to post back what I find out.
My reason for not giving too much information is simply because of the amount of flaming and trolling you get on forums. This forum looks friendly but you never know.

I did find one insurance company that was willing to talk to me. But it was still a nightmare. For example they looked at a tool I'd designed for removing wheel bearings and said "oooh we don't like the sound of that". The tool was nothing more than a glorified spanner. But as insurance people they had no practical knowledge. I just gave up.

[des8]

Re: Product liability & limited liability

I will try my best to remember to post back what I find out.
My reason for not giving too much information is simply because of the amount of flaming and trolling you get on forums. This forum looks friendly but you never know.

I did find one insurance company that was willing to talk to me. But it was still a nightmare. For example they looked at a tool I'd designed for removing wheel bearings and said "oooh we don't like the sound of that". The tool was nothing more than a glorified spanner. But as insurance people they had no practical knowledge. I just gave up.

Odd that. When i was working in insurance, if we didn't understand the risk or thought it too risky, we would commission a survey by an expert in that field (paid for by the insured) so that we could make an informed decision.
Things must have changed.

[distress]

Re: Product liability & limited liability

Odd that. When i was working in insurance, if we didn't understand the risk or thought it too risky, we would commission a survey by an expert in that field (paid for by the insured) so that we could make an informed decision.
Things must have changed.

the issue is "we would commission a survey by an expert in that field (paid for by the insured)" Des8. Time might have changed.... I have had a similar small problem, the expert you need to employ is very costly, more than one can afford: For a hopefully saving of 3K (a 10% at the max), I have to bring in an surveyor expert would cost me £1900 + VAT, and no he still not handle contract I still need a lawyer acting that will be at least 1K2 + VAT...that is the limbo